More than 5000 restaurant companies are at risk of insolvency as a result of the Brexit vote and business cost increases. A total of 5,570 restaurant companies have at least a 30% chance of going insolvent within the next three years according to Moore Stephens. Higher costs and stagnating incomes have put a strain on businesses, and the sharp fall in sterling since the Brexit vote has added to the pressure.

Mike Finch, restructuring partner at Moore Stephens, said: “It’s been a tough year for many restaurants in the face of rising costs and fierce competition. It is unrealistic to expect UK restaurant groups to avoid the impact of the fall in the pound by substituting for UK produce.”

The firm’s Moore Data service analysed licensed restaurants registered as limited companies to the year ending 24 November 2016. The UK imports 48% of its food and the fall in sterling has put pressure on the sector by increasing the cost of imports for restaurants.

As well as higher raw material costs, restaurant companies have also seen the cost of labour increase. The government raised the National Minimum Wage to £7.20 from £6.70 earlier this year which has put added strain on restaurants already struggling to remain profitable. The government has announced that it intends to raise the National Minimum Wage to £7.50 in April next year.

Finch added: “Restaurants have to make tough decisions as to how much they try to pass on to consumers. All this comes at a time when many consumers are likely to be very price conscious. The high number of potential insolvencies over the next year shows just how fragile finances can be in this sector. There may be further challenges to come as the UK’s trading agreements with Europe remain uncertain.”