A new report by accountancy group UHY Hacker Young has revealed the full impact of lockdown and social distancing with the Top 100 UK restaurants reporting losses in 2021 of £673m, up 174% on 2020, when losses hit £246m by September after the first lockdown periods.
Peter Kubik, T&R Partner at UHY Hacker Young says, “The end of lockdown has not resulted in a painless rebound in fortunes for the sector. Many restaurants are struggling to pass on increased food and wage costs to customers which is putting margins back under pressure. Omicron is just the latest set-back for an industry hit hard in the last two years.”
“They are also facing the threat of decreased consumer spending due to April’s increase in National Insurance.”
“The Government has stepped in to help and provided a great deal of support for the sector but it’s likely that even more will be needed, it’s no surprise that the industry is fiercely lobbying for an extension of its lower VAT rate.”
The report goes on to say that whilst many restaurant businesses were able to keep afloat by CBILS or BBLS lending, they are now having to begin repayment of those loans, putting pressure on their cashflow. It means that restaurants are also encountering the challenge of trying to make the most of the rebound in trading, whilst being short of staff.
On top of this, the hospitality sector has been hit by Brexit and, without a regular flow of younger workers from the continent, it has been far harder to recruit. This has pushed up wages at a time when trading is still volatile and other costs are also on the rise.
Kubik adds that although more restaurants are expected to become insolvent, these insolvencies could lead to a recalibration of rents for the hospitality sector. With the end of the moratorium on evictions of commercial tenants likely to create even more unoccupied space on high streets, falling rents could entice new entrants into the sector.