Restaurant Insolvencies Increase by 31%

A cashflow crunch brought on by Covid lockdowns has resulted in a 31% increase in UK restaurant insolvencies over the three-month period to September, compared to the previous quarter, according to a report from UHY Hacker Young.

Restaurants have, the report says, had to contend with a sudden increase expenditure following closures during lockdown, with sales not recovering quickly enough

A “cashflow crisis” has “tipped some over the edge” into insolvency.

The costs in question include bringing staff off furlough, restocking inventory, refurbishing the premises and repaying CBILS/BBLS loans.

In addition, restaurants can no longer rely on emergency Government support, which has now either ended or is being reduced. At the end of September, both the furlough scheme and a ban on winding-up petitions came to an end.

The ban had previously prevented creditors from taking legal action against companies that owe them money. UHY says it is “likely there are many more insolvencies to come as more creditors begin to pursue debts more robustly”.

Peter Kubik, partner at UHY Hacker Young said: “Restaurants have been hit with a cashflow crisis and this is partly due to the end of the furlough scheme. Unfortunately, fears that the end of Covid support schemes would lead to a rise in insolvencies are quickly becoming a reality.

“With wages no longer being covered by the furlough scheme, this leaves restaurants with a tough decision to make – either bear those extra costs themselves or make redundancies.”

He added: “The restaurant sector is still trying to get back up on its feet, whilst dealing with the huge burden of costs such as CBILS and BBLS repayments. There’s a risk a wave of insolvencies is waiting to happen if they don’t receive further support from the Government.”