New research has found the number of restaurants entering a company voluntary agreement (CVA) has increased by 143% over the last six months compared with the previous period.
Data analysed by law firm Linklaters shows that there were 12 CVAs in the first quarter of this year. This compares to 17 over the whole of 2017.
Richard Hodgson, restructuring and insolvency partner at Linklaters, said: “The sector has been faced with a number of issues that have caused a stranglehold. First, there’s oversaturation in the market. A number of chains expanded rapidly to the point that supply has raced ahead of demand.
“Couple that with increased food prices, staff costs and business rates, owners are looking at where they can reduce costs to put the business on a more sustainable footing.
“The idea is that by launching a CVA, as an emergency option, the company has an opportunity to tackle underlying problems, such as an overrented and inflexible store portfolio and ensure that a sustainable business survives. But if some of the root causes aren’t dealt with, it could be a case of delaying the inevitable.”