A cashflow crisis brought on by the pandemic lockdowns has resulted in a 31% increase in restaurant insolvencies over the three-month period to September, compared to the previous quarter.
The number of UK restaurant insolvencies has jumped 31% to 296 in the last quarter, up from 226 in the previous quarter*, our research shows.
The research has suggested that many restaurants have faced a cashflow crisis which may have tipped some over the edge into insolvency. After being closed for much of last year, restaurants are having to suddenly increase their expenditure, but their sales have not recovered quickly enough. These costs include bringing staff off furlough, restocking inventory, refurbishing the premises and repaying CBILS/BBLS loans.
The restaurant sector was one of the industries which relied the most on the Government’s Covid support schemes to stay afloat during lockdown. However, restaurants can no longer depend on this emergency support, as most of it has now ended or begun to be tapered.
At the end of September, both the furlough scheme and a ban on winding-up petitions came to an end. This ban prevented creditors from taking legal action against companies that owe them money. UHY Hacker Young says it’s likely there are many more insolvencies to come as more creditors begin to pursue debts more robustly.
Peter Kubik, Partner at UHY Hacker Young said “Restaurants have been hit with a cashflow crisis and this is partly due to the end of the furlough scheme. Unfortunately, fears that the end of Covid support schemes would lead to a rise in insolvencies are quickly becoming a reality.”
“With wages no longer being covered by the furlough scheme, this leaves restaurants with a tough decision to make – either bear those extra costs themselves or make redundancies.”
“The restaurant sector is still trying to get back up on its feet, whilst dealing with the huge burden of costs such as CBILS and BBLS repayments. There’s a risk a wave of insolvencies is waiting to happen if they don’t receive further support from the Government.”