Coronavirus

Restaurant and pub insolvencies rose before pandemic, says UHY Hacker Young

There were 1,452 restaurant and 526 UK pub insolvencies last year, according to UHY Hacker Young.

The financial firm said that the industry was “stuck in a long-term slump” even before the onset of the Covid-19 pandemic.

Some 1,452 UK restaurant businesses and 526 UK pub businesses entered insolvency in 2019, which highlighted the “weak state of the leisure industry as it entered the coronavirus-related disruption”.

In 2019, restaurant insolvencies rose 10%, up from 1,323 the year prior, while pub insolvencies also increased 10%, up from 480 in 2018.

UHY Hacker Young said that “many more insolvencies” can be expected after government orders for restaurants and pubs to shut amid the pandemic.

The group is now calling for the government’s coronavirus rescue package to prioritise channelling funds to smaller restaurant and pub businesses as the pandemic progresses. 

Peter Kubik, partner at UHY Hacker Young, said: “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.”

He added: “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.”

The firm also warned that the government’s emergency loan scheme is being channelled to small businesses through accredited lenders, which may cut off smaller businesses who “traditionally have to borrow from second tier lenders”.  

Kubik said: “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.”

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