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Restaurant insolvencies rise by 70%

Published:  05 May, 2009

Restaurant insolvencies have risen by 70% for the first three months of this year, but the amount of pub closures has reduced, new research shows.

The alarming rate of restaurant closures is revealed in a study carried out by PricewaterhouseCoopers (PwC), details of which were revealed today. It reveals that diners are opting for branded restaurant chains at the expense of smaller eateries.

Celebrity chef, Anthony Worrall Thompson's AWT group was among some of the high profile casualties in the restaurant sector this year.

PwC figures show that 186 restaurant companies went insolvent up until March this year, an increase of 70% since the beginning of 2008.

Stephen Broome, director of Hospitality and Leisure, PricewaterhouseCoopers LLP, said: "Lower numbers of customers are spending less on dining out, and this combined with over supply in some locations means it is no surprise that more restaurants are failing. Despite the odd high profile casualty, the data tells us that the majority of failing restaurants businesses are smaller often one off restaurants at the lower end of the market."

The branded restaurant market performed strongly.

Broome said that investment in promotional activity had reaped dividends for the sector.

There was better news for the embattled pub sector which recorded a reduction in insolvencies for the first three months of this year.

In mid-2008, insolvencies in the sector increased by 120% and 97% respectively over 2007 and 2008 levels.

By contrast the rise in insolvencies during the first quarter of this year when compared to that of 2008 was a third which may signal a respite in business failures.

Broome added: "Many pub groups have seen some benefit from December trading which, despite the downturn, will still have provided some Christmas cheer.

"With the quieter months of January and February now a distant memory many landlords and pub companies are hopeful of survival through to the summer."