The number of UK restaurant insolvencies has jumped 31% to 296 in the last quarter, up from 226 in the previous quarter, according to accountancy group UHY Hacker Young.
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. UHY Hacker Young believes this may have tipped some over the edge into insolvency.
The national accountancy group also warns many more insolvencies are likely due in part to the lifting of a ban that previously prevented creditors from taking legal action against companies, resulting in more creditors beginning to pursue debts more robustly.
Peter Kubik, partner at UHY Hacker Young, says: “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.”