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Restaurants buck falling insolvencies trend 11 September 2014

The number of restaurants entering insolvency has jumped 15% year-on-year, going against falling levels of insolvencies across all sectors.

According to figures from accountancy firm Moore Stephens, 747 restaurant businesses entered into a formal insolvency process between June 2013 and June 2014, compared to 648 the previous year.

During the same time period (June 2013 – June 2014), overall insolvency levels fell from 15,993 to 15,356.

Moore Stephens highlights issues such as bad weather, with particularly unseasonable weather during the last winter leading to heavy flooding, having a detrimental effect on restaurants.

Gas and electricity prices have increased 6.9% over the last 12 months – 5.8% per annum since 2008 – putting further pressure on restaurant operators, with food prices also increasing.

Mike Finch, partner in the Moore Stephens restructuring and insolvency team, said: “The fact that the weather can push so many restaurant businesses into insolvency shows how fragile the finances can be in this sector.”

“Restaurants are being squeezed between rising costs and stagnant consumer spending on eating out. Many have struggled through five years of belt tightening by customers, which has seen cash reserves run extremely low.

“Restaurant owners should start to plan ahead for the inevitable interest rate increases. These will certainly have a knock-on effect for their businesses, and it is important to be prepared for this eventuality.”

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