Restaurant company insolvencies are happening at a faster rate than during covid, according to new research by audit, tax, and advisory firm Mazars.
Insolvencies have increased 59% over the past year, jumping from 984 in 2020-21 to 1,567 in 2021-22. In the last three months, the number of restaurant companies becoming insolvent increased by 15% to 453, up from 395 the previous quarter.
Restaurants across the UK have been dealing with the highest level of inflation since 1981 and a slowdown in consumer spending. As well as increasing food and energy costs, restaurants have been hit by shortages of labour, particularly for skilled roles such as chefs, which has pushed up staff costs. Some restaurants have already revealed they will be cutting their trading hours in order to save on the cost of energy.
Rebecca Dacre, partner at Mazars, said:
“Insolvencies of restaurant businesses are now happening at a far faster rate than during covid. It is a very toxic mix of rising input costs, sharply rising finance costs and weak demand. Most restauranteurs have not seen this combination of negative factors before. The Christmas trading period is usually a bumper period for hospitality businesses.
However, restaurants will be bracing themselves for a very tough winter and many face a real battle to keep afloat. There’s a certainty of further insolvencies if they don’t receive much more support from the government, but the chances of the government fully turning on the taps is low.”