More than a third of the UK’s top 100 restaurant chains are now loss-making, underscoring the intense fight for survival faced by some of the sector’s best-known names.
Data compiled by accountancy firm UHY Hacker Young has found that 35 of the UK’s top 100 restaurant groups are in the red, marking a 75 per cent surge on the equivalent number this time last year, with no sign of respite.
On Friday, Prezzo announced it would close 94 restaurants. Also in recent weeks, Jamie’s Italian and burger outlet Byron have both launched rescue plans that will lead to branch closures and lower rents being negotiated with landlords. Strada closed 11 sites in January while another Jamie Oliver venture, Barbecoa, collapsed into administration in mid-February.
Britain is oversaturated with “fast casual” dining chains on overcrowded high streets, UHY said. A rising minimum wage, apprenticeship levies, a weak pound and surging popularity of delivery services have also crippled balance sheets.
Peter Kubik, a partner at UHY Hacker Young, said there was “little respite on the horizon” for restaurant chains. “Pressures on the restaurant sector have been building for years, and the last year has pushed a number of major groups to breaking point,” he said.
“With Brexit hanging over consumers like a dark cloud, restaurants can’t expect a bailout from a surge in discretionary spending,” he added.
He said that “consumers only have a finite amount of spending power when it comes to eating out” and that the “oversaturation of the market means that groups that fall foul of changing trends can very easily fail”.
“The Government has ratcheted up costs with a series of above-inflation rises in the minimum wage, and we are just weeks away from another 4.4 per cent rise in April. That will be tough for a lot of restaurants to absorb,” Mr Kubik added. The news follows research from Moore Stephens that found 20 per cent of restaurants, or 14,800 outlets, are threatened with closure. The number of restaurants declaring insolvency has rose by 13 per cent in the year ending March 2017, according to the study.