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Business failures in eating out sector to increase, expert warns

Published:  03 January, 2012

The hospitality sector will have to innovate to survive, as trading toughens in 2012, warns foodservice consultancy Horizons.

The hospitality sector will have to innovate to survive, as trading toughens in 2012, warns foodservice consultancy Horizons.


Horizons predicted that the UK's 260,000 eating-out venues will have to work harder to encourage consumers to part with their cash - given unemployment is rising and consumer confidence worsening.



"Although the number of corporate failures in the UK eating out sector has been fairly small, balance sheets have been stretched during 2011 and it will not take much to see the rate of failures rise, probably as early as the first quarter," said Horizons' managing director Peter Backman.


"High street restaurant operators will continue offering customers discounts, meal deals and moneyoff vouchers to improve traffic, which will depress their profit margins, although the anticipated fall in food costs this year will help counteract the cost of discounts."


Although he said the Olympics would benefit some outlets, other operators could see visitor numbers fall. Backman predicted that if the UK sees 10% fewer visitors this year, the eating out market will be £100 million worse off.


Horizons noted that consumer spend has been falling since 2009, and was down 3-5% in volume for 2011. The average price paid by consumers fell as consumers selected cheaper menu options and skipped starters, desserts or side dishes.


"However, the UK's foodservice industry is particularly good at reinventing itself and adapting to change," said Backman.

Recent innovations have included extended opening hours, free wifi, new services offering breakfast and coffees and tapas-style dining.

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