Monday 8 February 2021 6:30 am

Losses at top 100 restaurant groups rocket 112 per cent to £571m

Losses at the top 100 UK restaurant groups increased 112 per cent to £517m last year, rising from reported losses of £269m at the end of last month.

According to UHY Hacker Young, the losses are expected to continue, as restaurants have been forced to shut again because of the latest coronavirus restrictions.

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UK Hospitality, the trade association for the hospitality industry, has urged the government to do more to help the sector by extending the reduced 5 per cent rate of VAT on the sector until the end of 2021 to prevent a wave of redundancies. VAT is scheduled to revert back to 20 per cent at the end of March.

Peter Kubik, partner at UHY Hacker Young said: “These figures reveal how seriously the UK restaurant industry was already struggling pre-pandemic. The most worrying part is the restaurants will be still having to absorb the impacts of lockdowns for weeks or months to come.

“The government has stepped in to help but it’s likely that even more will need to be done – very few industries have been hit as hard as restaurants. At the very least the hospitality VAT cut will almost certainly have to be extended.” 

Impact of takeaway

Restaurants have become even more reliant on home delivery services like Deliveroo and Uber Eats over the past year to generate sales and stay afloat. However, this can be a double-edged sword as commissions of up to 35 per cent plus VAT are taken from the restaurants by the platforms.

Alcohol sales – traditionally a key high-margin offering for restaurants – are also sharply lower through these apps than for in restaurant meals where diners are more highly likely to buy alcohol with their meal. 

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UHY Hacker Young said a wave of restructuring is likely to continue in the restaurant sector, particularly the use of Company Voluntary Arrangements (CVAs) to keep businesses afloat. Many UK restaurant groups have had to launch a CVA while others have been sold via administrations.

The Restaurant Group, owner of the Wagamama, Frankie & Benny’s and Chiquito chains recently announced plans to use a CVA to restructure the business including closing 125 restaurants. CVAs have also been used by Leon, Pizza Express and Yo! Sushi among numerous others since the start of the pandemic.