‘Wave of insolvencies’ in restaurant sector expected this year

A “wave of insolvencies” in the UK restaurant industry is predicted for later this year together with further job cuts, according to data from UHY Hacker Young.

In addition, restaurant groups are expected to reduce the number of operating sites, while menus will be reduced in size. Job losses are expected to rise once the job retention scheme comes to an end.

UHY Hacker Young has revealed that there might be an increase in businesses using company voluntary arrangements (CVA) in order to stay afloat. This involves restaurants agreeing to pay back creditors over a fixed time period in order to continue trading.

Peter Kubik, partner at the accountancy and business advisory service, said: “The restaurant sector has been put under huge pressure by this crisis and the lockdown. The sector really needs the government to formulate proposals that will help the sector bounce back as quickly as possible.

“Flexibility on social distancing rules will therefore be key in both ensuring customers enjoy their experience and restaurants remain profitable. Restaurants face big upcoming bills to deal with the post-lockdown period. It is essential they start putting in place cash management measures as soon as possible to ensure they have enough working capital to meet them.”

In the first quarter of 2020 (to 31 March), losses recorded by the UK’s top 100 restaurant groups increased by 94% to £151 million. This compared to losses of £78 million in the same period in the previous year.

UHY Hacker Young said losses will continue to increase as restaurants struggle to reopen with social distancing guidelines in place.

This will involve many sites reducing their capacity to ensure tables are sufficiently spaced. Additional costs may include installing screens at bars, proving staff with PPE, hiring experts to conduct risk analyses, paying for additional cleaning services, providing hand sanitiser for customers and moving to contactless payment only.

Last week UK Prime Minister Boris Johnson hinted that pubs and restaurants could reopen earlier than expected. The government had previously stated that hospitality outlets could start to reopen from early July, providing they were Covid-secure, but Johnson said he was now “more optimistic” than he had been and said “we may be able to do things faster” than he had previously thought.

He also asked government scientific advisors to review the recommended two-metre spacing in restaurants, given that the World Health Organisation’s recommendations are for a one-metre gap.

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