1,452 UK restaurant business and 526 UK pub business insolvencies last year

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  • Even before Coronavirus, industry was stuck in a long-term slump
  • Government’s Coronavirus rescue package must prioritise channelling funds to smaller restaurant and pub businesses

1,452 UK restaurant businesses and 526 UK pub businesses went insolvent in 2019, highlighting the weak state of the leisure industry as it entered the Coronavirus-related disruption.

The number of restaurant insolvencies rose 10% last year, up from 1,323 in 2018, while the number of pub insolvencies also increased 10%, up from 480 in 2018* (see graph below).

The requirement for all restaurants and pubs in the UK to close immediately is expected to result in many more insolvencies.

Peter Kubik, partner in our London office, says: “There are few sectors that are going to be more heavily impacted than pubs and small restaurants.”

“Most other businesses can shift their staff to home working or sell through the internet. Clearly that is not possible for pubs.”

“For those restaurants that decide to carry on selling takeaway food they face the problem of having to give delivery companies a very large percentage of their remaining income.”

“Both the pub and restaurant industry feel they need more specific assistance from the Government.”

Whilst the Government has launched an emergency loan scheme this is to be channelled to small businesses through lenders which are already accredited. This may cut off many smaller pub and restaurant companies, who traditionally have to borrow from second tier lenders who are not on the list of accredited lenders.

Peter adds: “Small restaurant and pub companies are also going to worry that banks will prefer to lend to the biggest and best capitalised companies in their category, who are in less need of emergency loans.”

“The Government has already done a lot by suspending business rates and VAT payments and offering wage subsidies to help ease the burden on businesses. However, their next step should be ensuring the health of the long list of businesses that banks still won’t lend to even under the new scheme.”

High-profile restaurant chains in other countries have already fallen into insolvency due to the Coronavirus, suggesting some UK restaurants could face a similar fate. German-based restaurant chains Vapiano and Maredo both fell into insolvency in March 2020.

Number of restaurant business insolvencies reaches highest in five years, while number of pub business insolvencies hits highest in four years

*Source: Insolvency Service