- Many restaurants may not be financially viable with social distancing rules in place
Losses at the UK’ Top 100 restaurant groups increased 94% to £151m last year, growing from a loss of £78m the year before according to research from UHY Hacker Young.
The Top 100 restaurant groups have seen losses worsen in recent years (see graph below) and this trend is expected to continue as restaurants grapple with the difficulties of reopening whilst meeting social distancing guidelines.
The Government has announced that restaurants could be allowed to reopen on 4 July, although this would be at a reduced capacity to ensure social distancing.
Industry groups have since been lobbying the Government for more practical social distancing rules to ensure it is still financially viable for restaurants to reopen. For example, a reduction to a 1m gap between customers, rather than the proposed 2m.
Additional precautions that restaurants may need to put in place include Perspex screens at the bar and providing PPE for staff. However, there has been push back against these measures as they could reduce the attraction of going to a restaurant, leading to lower footfall.
Additional costs that restaurants may incur if they reopen include:
- Hiring experts to conduct extensive risk-assessments to ensure that social distancing rules are safely enforced
- Bringing professional cleaners in more regularly to clean each premises
- Providing hand sanitizer for customers and PPE for staff
- A move from cash to contactless payments only. Some restaurants may need to invest more money into card machines which will incur transaction fees
In addition to fears over whether it will be financially viable to reopen on 4 July, many restaurants will also be concerned about the payments they will have to make when rent holidays come to an end on 30 June.
Wave of insolvencies expected
A wave of insolvencies within the restaurant sector is expected later this year, the research expects. In order to remain solvent, a number of restaurants are likely to look at reducing branch estates, cutting menus and making further redundancies, especially once the furlough scheme comes an end.
The use of Company Voluntary Arrangements (CVA) could become more prevalent as restaurants look for ways to survive. CVA’s involve agreeing payment of debt with creditors over a fixed time period, in order to continue trading.
Peter Kubik, partner at UHY London office, says: “The restaurant sector has been put under huge pressure by this crisis and the lockdown. The sector really needs the Government to formulate proposals that will help the sector bounce back as quickly as possible.”
“Flexibility on social distancing rules will therefore be key in both ensuring customers enjoy their experience and restaurants remain profitable.”
“Restaurants face big upcoming bills to deal with the post-lockdown period. It is essential they start putting in place cash management measures as soon as possible to ensure they have enough working capital to meet them.”