Restaurant insolvency rates highest in a decade

14th July 2023 | Jack Oliver

British restaurants and cafés are going bust at rates not seen in over a decade, according to the Insolvency Service.

In the past to years to March 2023, 3,347 establishments were unable to pay their debts, with 98% of cases ending in closure.

An average of six restaurants a day were affected by an inability to stay solvent during the first three months of 2023.

Data from lobby group UKHospitality has shown that the number of restaurants in the UK has declined by 18% since March 2020 – when the country first went into a Pandemic lockdown – with 3,415 shutting their doors.

The hospitality industry was hit hard by multiple COVID-19 lockdowns, with many forced to shut their doors. As a result, many restaurant and café businesses were left with high amounts of debt.

Now with extraordinary levels of inflation leading to higher interest rates, a large amount of hospitality businesses have been unable to pay these debts off.

The Bank of England says that companies which are facing interest payments that are higher than 40% of their annual revenue a more likely to experience difficulties with repayment.

The number of medium-sized companies hitting this threshold is expected to hit 70% by the end of 2023, the highest amount since 2009, when the country was still reeling from a global financial crisis.

Interest rates for small and medium-sized businesses taking out new loans have more than doubled in the past 12 months, rising from an average rate of 3.4% to 6.9%.

UKHospitality CEO Kate Nicholls told Sky News that businesses are facing a “perfect storm”.

She also called on the Government to work with energy regulators to bring down bills for businesses, another impactful factor in the constant battle between restaurants and the cost of doing business.

She added: “Energy costs for small restaurants have gone from being 4% of turnover to 14% of turnover. And that’s often happened overnight, and it just means they can no longer make a profit. So, you’ve got a third of the sector trading at or below break-even.

“We need the government to be working with Ofgem and the energy companies to bring down energy prices to more reasonable levels more rapidly.”


Looking for more retail news? you might find these interesting