Insolvencies and Business Rates Put Pressure on Restaurant Sector

19th February 2018.

Jamie Oliver is the latest restaurant owner to face branch closures as business rates hike up costs and force owners to abandon trading.

The total bill for restaurants across Mr Oliver’s empire rose from £5.7 million to £7.3 million in the last year, with one bill for one restaurant in Brighton jumping by a whopping 154 percent, according to an analysis by property firm Colliers. Many owners simply do not have the capital to survive, and many are begging their landlords for reduced rent, as higher business rates eat into their profits. Other chains such as Prezzos Italian and burger chain, Byron, are also facing higher costs and are struggling to stay afloat. More needs to be done to help these owners, whether it’s involvement from the Government to cut down business rates, or easier assess to finance.

Here at the Credit Protection Association, many of our members from the restaurant sector come to us for relief from biting costs from the sector. Owners need to know they have alternative options other than insolvency, and that credit management services such as what we offer at CPA, can help keep their kitchen open in the long term.

Other issues that are hampering the sector are the higher wage costs brought about by the increased living wage, and the apprenticeship levy which is incurring more costs than it saves.

As the country remains stuck in prolonged negotiation with the EU, the cost of imported produce has increased and have hit the profitability of restaurants as stock becomes harder to afford. The increased cost of brick and mortar stores has also increased the success of online and takeaway restaurants, as faster delivery and order times attract customers.

As costs rise and competition raises its game, many owners go to lenders to find the answer. However, this can lead to further debt and leave you in a worse state than you were before. Jeremy Willmont, of accountancy firm Moore Stephens, insists that caution should be adhered to by owners in regards to gathering further debt, particularly if costs continue to rise.

Here at the Credit Protection Association, many of our members fight against rising costs. This can be anything from business rates and interest rates to all areas of inflationary pressure, with many stumbling to find the way out. Credit management services that we offer at CPA offer business owners a way to recover bad debt and revive their business, without putting their revenue in danger. We recently helped on of our members of the meat packaging industry with a debt for over £839, and within 7 days it was back in his account! Many fear the recovery will take too long, but it doesn’t have to! You just have to try.