Unprecedented trading conditions have caused chaos
Restaurants have always been a great bellwether of the wider economy’s health as well as being wonderful environments to visit and work in.
From the food to the potential for company or even just sitting and enjoying the atmosphere and ambience of a busy restaurant – there is simply nothing like them.
Working in them for any length of time, even if you don’t go on to enjoy a career in the food or hospitality industry will teach many lifelong lessons that can be applied across a range of sectors and occupations too.
It might not be a surprise then that the current Prime Minister, Rishi Sunak, worked as a waiter in a well-known Indian restaurant in Southampton called Kuti’s Brasserie. He has remarked that it was the “best training” he had in preparing to be PM as it was a balancing act that both waiters and ministers always needed to master.
So it’s sadly ironic that Kuti’s became one of the latest restaurants to close when they announced that they would be going into liquidation last month.
The restaurant sector, with Indian restaurants in particular, are facing many challenges on different fronts this year.
One of the most difficult areas they’ve encountered is recruitment with generational changes becoming apparent for the first time.
In recent decades, the children and grandchildren of restaurateurs are opting not to take the traditional route of joining the family business but are instead leaving home, going on to higher education and university and starting professional careers in other sectors.
Combined with a reduced pool of qualified chefs and staff available to draw on from India, Pakistan, Bangladesh and Sri Lanka and the effects are becoming apparent.
Bashir Ahmed, president of the British Bangladesh Chamber of Commerce said: “At least 70% of the UK’s curry houses are in danger of closing down due to the cost of living and labour shortages.”
In 2007 there were a total of 12,000 Indian restaurants open in the UK. This has now reduced to 8,500 with more closing every week according to industry statistics.
Kate Nicholls, chief executive of UKHospitality, expands on the issue. She said: “Hospitality still has a perception problem in the UK, I think in terms of a career versus a job.”
She notes that in Europe and many countries outside of the EU, hospitality careers are backed up by a range of hotel schools that turn out highly skilled workers while pointing out that both Covid-19 and Brexit have disrupted the talent pipeline for the industry.
“This idea that it’s either training up the UK staff or import foreign workers is a false dichotomy. You’ve got to do both. At the moment our immigration policy is insufficiently nuanced to reflect the needs of the labour market.”
This is reflected in the official business insolvency statistics for the restaurant and mobile food service sectors.
|Number of insolvencies
2022 was a landmark year for the restaurant sector and not for any good reasons.
December was the worst month for UK restaurant closures in four years with 188 in a 31 day period.
This is 71% higher than December 2021 when 110 restaurants closed down and the highest monthly total since January 2019.
The surge in restaurant failures also made Q4 in 2022 the worst quarter for closures too with 504 closing – an 11% increase on Q3.
The two preceding quarters in 2022 – Q2 and Q3 had 396 and 453 respectively which were each the worst quarter for restaurant insolvencies recorded at the time.
Chris Horner, insolvency director with BusinessRescueExpert, said: “It’s doubtful if the restaurant industry as a whole has had to face the combined challenges of the previous three years for decades – if ever.
“The highest level of inflation for over 40 years, sharp declines in consumer confidence and spending combined with transport issues over Christmas meant that their traditionally busiest period was restricted.
“Combined with increasing food, energy and labour costs – even the restaurants that have struggled on have had to try measures such as reduced trading hours to stay afloat.
“The next few months will also see more challenges including the removal of business energy support at the end of March and consumer spending reducing as a result of rising mortgages and other bills.
“They can also choose to close through a liquidation if there’s no clear path back to profitability but this could also mean that if they closed the business, their debts would be written off too.
“The most important thing they can do, no matter at what stage their business finds itself, is to get in touch with an impartial insolvency advisor, to find out what options they have available right now.”
One of our experienced advisors will familiarise themselves with the business and its situation and will be able to focus on what realistic courses of action are available – usually more than they thought they had.
We’d always urge them to get in touch sooner rather than later because if the situation worsens, then the room to act also shrinks.