Restaurant insolvencies jumped 31 per cent in the last quarter as eateries struggled to match rising costs with increased customer demand, according to accountancy group UHY Hacker Young.
Its latest update revealed 296 UK restaurants called last orders between July and September, up from 226 between April and June.
After being closed for much of last year, restaurants are having to suddenly increase expenditure on bringing staff back from furlough, restocking inventories, and repaying loans.
Unfortunately, sales have not recovered quickly enough to mitigate the costs.
This has caused a cash-flow crisis which may have tipped some over the edge into insolvency.
The restaurant business has been highly reliant on the government’s Covid-19 support schemes to stay afloat during the past 20 months.
However, the hospitality sector can no longer depend on emergency support, which has mostly tapered or concluded this winter.
At the end of September, both the furlough scheme and a ban on winding-up petitions came to an end.
This ban had prevented creditors from taking legal action against companies that owe them money.
Now, restaurants are exposed to third-parties calling in their debts.
UHY Hacker Young expects many more insolvencies to come as creditors begin to pursue debts more robustly.
Peter Kubik, partner at UHY Hacker said: “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.”