Record 64% of the UK’s top 100 restaurant companies are now making a loss
The national accountancy group, UHY Hacker Young, has revealed that a record 64% of the UK’s top 100 restaurant companies are now making a loss.
Several restaurant groups have suffered heavy losses due to major restructuring programmes and debt repayments, particularly to landlords, undertaken following the pandemic.
The sector had expected a post-pandemic recovery in profits, but this has been put on hold by spiralling food inflation and a fall in consumer confidence caused by interest rate rises.
Labour shortages have also impacted the businesses, causing restaurants to restrict covers and therefore reducing the revenue they can generate, especially at peak times.
Peter Kubik, partner at UHY Hacker Young, said: “It may be a case of ‘out of the frying pan, into the fire’ for many UK restaurant groups. They expected, and needed, higher consumer spending as we put Covid further behind us, but this spending is now likely to fall when it is needed most.”
Restaurants were already facing difficulties before the pandemic. Many groups took on large amounts of debt to fuel aggressive expansion campaigns, which meant many were trading at a loss even in ‘normal’ pre-Covid conditions.
However, restaurant groups expect to return to profitability in the longer term. The restructuring programmes undertaken by many businesses have reduced the size of their debts, while several significant chains have closed unprofitable branches.
Peter Kubik added: “The restaurant sector has been left reeling by successive economic setbacks. The pandemic, shortly followed by soaring inflation and supply chain issues hit the sector when many restaurant groups were already vulnerable.”
“Promising signals for the sector are coming through, despite the current difficulties restaurant companies are facing. The success of restructuring campaigns, unprofitable branches closing and debts shed through CVAs brings hope for a sunnier future for the restaurant sector.”
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