The UK is out of recession, with the British economy slowly recovering and showing positive signs of growth. But a number of businesses are still feeling the effects of recession. Indeed, many are nevertheless suffering from insolvency. Although insolvency rates are generally declining, do our restaurants have reason for optimism?

Well, the expert opinions on this matter are quite polarised. The answer seems to be both yes and no.

Looking broadly at the numbers, the foodservice industry is growing, just like many other sectors. The value of the market is expected to grow from 2-3%, depending on your source of information. The foodservice industry is undoubtedly heading back to pre-recession levels. But for the small and medium owners, there are increasing levels of debt problems in the restaurant trade.

 Debt Problems in the Restaurant

Insolvency in the restaurant trade has actually risen by 15% in the past 12 months. While increased consumer spending has boosted a lot of industries, the restaurant trade was hit by last year’s poor winter weather. Gas and electricity prices for restaurants rose by an average of 6.9% last year, while the cost of food rose by over 4%. But there’s another important factor that’s hindering this market.

More of us are dining out, but consumer spending in this area is fairly static, so when you analyse this alongside the growing costs, there’s a clear problem. And one which doesn’t just hinder small restaurants – the likes of Bella Italia and Café Rouge are amongst those who are struggling. Café Rouge in particular made the headlines recently, as they entered into a Company Voluntary Agreement (CVA) after debt restructuring deals were agreed with their main creditors.

There’s no obvious solution. While insolvency figures for restaurants in the South East make for more pleasant reading, but industry insiders are also wary of future interest rate changes. It’s inevitable that interest rates will rise at some point and that will mean less disposable income for everyone, which in turn will have an impact on our dining options.

In summary then, it seems that the restaurant market will emerge from the recession for some, but not others. Branded restaurants and managed pub chains will continue to expand, but the rest won’t feel a full economic recovery. Not yet anyway. The restaurant trade is a fragile one. It’s a trade that, obviously, relies heavily on consumer spending habits and that’s something that’s always influx.

For years, I have been advising restaurant owners on the various issues relating to debt problems in the restaurant industry. If you want clear advice and assistance in weathering the debt storm email me at ewall@robsonscott.co.uk or phone me on 01325 365 950.

 

Best wishes

 

Eamonn Wall