Losses at the UK’s top 100 restaurant chains grew 24% from £673 million to £832 million in just the past six months, according to a study from accountancy business UHY Hacker Young.
The scale of the losses has been driven by the effects of major restructuring initiatives introduced following the coronavirus pandemic.
Restaurants that were forced to close during the pandemic saw their debts – primarily to landlords -build to “unsustainable levels” in some instances, according to the report.
This resulted in some needing to write off debts through arrangements like Company Voluntary Arrangements (CVAs).
Since the sector reopened with the tailing off of the pandemic, restaurants have faced spiralling energy bills, supply chain issues and ingredients inflation that have driven up food costs due in the main to Russia’s invasion of produce provider Ukraine in what has become a perfect storm for restaurant owners.
UHY Hacker Young said that the restaurant sector was already “in difficulty” long before the pandemic with several restaurant chains that had expanded very aggressively, taking on large amounts of debt.
Peter Kubik, partner at UHY Hacker Young said: “Losses among the UK’s major restaurant chains have reached enormous proportions. Many of them overextended themselves significantly over recent years, just in time to be hit by Covid and inflation running out of control.”
“With economic dark clouds still gathering and the UK facing a cost of living crisis, there are still strong headwinds facing the casual dining sector. Restaurants are likely to be under a lot of pressure for some time yet.”
However, Kubik did add that UHY Hacker Young felt that the worst was over, due to many restaurant chains reservicing debts or bringing in aggressive cost cutting strategies.
