The latest research analysis by Price Bailey (Accountancy firm) shows that restaurants closing is at its highest rate in a decade for the first three months of the year.
A total of 569 restaurant businesses filed for insolvency in the first quarter of 2023, an average of 5.6 per day.
The Quarter 1 data shows that over the last 12 months, 2,028 restaurants have closed. The report notes that 1,303 restaurants closed in 2021, an average of 3.1 per day.
Situation set to get worse
Price Bailey says the closing rate is only likely to get worse with restaurants closing as rising interest rates prevent heavily indebted companies in the sector from repaying their loans.
Despite the growing number of insolvencies, separate data from national statistics commissioned by Price Bailey has shown that restaurant optimism is on the rise.
A third of UK restaurants say turnover is up rather than down, a dramatic improvement from six months ago when just 16% reported an increase in turnover, versus 37% saying revenue was down.
Matt Howard, Head of the Insolvency at Price Bailey, said “The improving economic outlook may come too late for many restaurant businesses which have racked up unmanageable levels of debt over the past few months. difficult years.”
“There is often a lag between the return to more robust economic activity and the decline in insolvencies. Banks will likely begin to put increasing pressure on debtors to perform or repay their loans.”
Restaurant chain in administration
Le Pain Quotidien was forced to close nine branches in the UK, leaving just one cafe at St Pancras station after collapsing into administration.
In May, The Restaurant Group (TRG), which owns Wagamama, Frankie & Benny’s and Chiquito, would close up to 35 locations over the next two years.
Howard concluded “Restaurants are capital-intensive businesses. The cost of acquiring restaurant leases and equipment can run into the millions per site in prime downtown locations.”
“Many are very well equipped and perpetually walk on the balance sheet tightrope. As interest rates climb, it may only take a few months of bad earnings to turn them around.”
The number of businesses closing seems set to rise still further.