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Restaurant Insolvencies Up as Sector Faces ‘Onslaught of Challenges’

By Jon Munnery
29 March 2022

The number of restaurant businesses entering insolvency increased notably during the final three months of last year, according to a new set of figures.

Data from the accountancy firm UHY Hacker Young shows that insolvency cases in the sector increased by almost a fifth in Q4 2021, compared to the previous three months.

The Covid crisis had a huge impact on the hospitality sector across the UK but indications suggest that even with the worst of the pandemic behind them, restaurant businesses are still facing tough economic headwinds.

Among the issues affecting operators in the sector is that of commercial landlords now being legally allowed to pursue debts owed by their tenants in relation to periods of time during which they were unable to open due to Covid restrictions.

Being forced to repay rent arrears could be enough to push a growing number of restaurant businesses into insolvency and potentially liquidation in the coming months.

Inflationary pressures are already being felt by businesses across the sector and restaurants will soon be obliged to absorb an increase to National Insurance rates, which will further add to their overheads.

Also, with the Bank of England’s base rate of interest having increased recently, restaurant businesses can expect any loans they take on to be more expensive than they would have been in recent years.

Overall, it is clear that restaurant businesses are currently operating in the face of some tough economic headwinds and many will be considering their options around insolvency and liquidation as the year goes on.

“The restaurant sector has emerged from one crisis only to face an onslaught of other challenges,” said Peter Kubik, a partner with UHY Hacker Young in London.

“Covid restrictions may have ended but higher loan repayments, National Insurance increases and potentially lower demand as the cost of living crisis starts to bite could see an even greater number insolvencies within the sector.

“Restaurants could at least rely on government support during the worst of the pandemic. Now that these protections have come to an end, they’re having to face multiple challenges with zero help.”

Jonathan Munnery
Insolvency & Restructuring Expert
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