Scottish restaurant failures up nearly 90%.
James Salmon, 18/02/2019.
Scottish restaurant failures are up nearly 90%.
The number of Scottish restaurants going bust reached a record high last year, according to figures from the Insolvency Service.
Statistics for 2018 shows an 86.3% increase in annual restaurant failures across Scotland, with 136 businesses collapsing in total, up from 73 in 2017. The figures, which equate to one restaurant going bust every three days across country, underline a difficult landscape for Scottish businesses in general – as cost pressures and political uncertainty affect business growth.
Across all sectors, businesses have been affected by a dip in consumer confidence, rising cost pressures, reduced lending and political uncertainty related to Brexit.
A record number of businesses in Scotland went bankrupt last year, with restaurants accounting for 13.9% of total corporate failures. In total, 945 businesses became insolvent, up 21% from 2017 which saw 780 Scottish companies fold.
High Street pressures see major chains close sites
The hospitality industry has suffered especially, however, as high street businesses face pressure from increasing rents and wage costs as well as high business rates, in addition to rising cost of supply for ingredients.
For the dining sector, an increase in the popularity of food delivery services has disrupted the restaurant dining model and led to increased competition just as expenses rise, while competition from pub chains also increases as pubs rely on food sales to absorb pressure from rising alcohol taxes.
In this context, the failure rates facing restaurant businesses seem unlikely to slow down.
Eileen Blackburn of French Duncan predicts that recent closures are “likely to be the tip of the iceberg,” noting that the “near doubling of restaurant failures in one year” in Scotland presents “quite an alarming reflection of the state of the sector.” Major dining chains including Byron, Carluccio’s and Prezzo closed some outlets in Scotland last year.
Closures “tip of the iceberg”
In addition to those business failures captured by statistics, analyst predict that many more are closing without entering into formal insolvency processes, pointing to even higher numbers of Scottish restaurants likely to be struggling or on the brink of insolvency.
As difficulties in the sector seem set to continue, businesses are advised to strengthen their credit management systems in order to fortify their finances as far as possible, recovering any debts where possible to mitigate risks.
How can CPA help?
Do you supply to restaurants?
If so you need to protect the credit you extend them!
The Credit Protection Association can help!
At the Credit Protection Association, we provide first class credit information that can help you avoid being over extended to customers who are at risk. Our monitoring service can flag up warning signs long before the end, giving you the chance to adjust and reduce your exposure. We provide recommended credit limits and credit scores on a traffic light system and can help you set appropriate credit policies for your customers.
We regularly publish lists of the latest insolvencies but by then it is too late. Our credit reports however predict approximately 96% of company insolvencies long before they arrive.
Companies in trouble usually have very bad bad cash flow and they try to deal with it by delaying payment to their suppliers, increasing your exposure to them.
If you supply to restaurants, help us help you identify the risks.
As a third party collector, we can also get your payments prioritised over those who are not as hot on collections. When you customer receives a letter from the Credit Protection Association regarding their outstanding account, they are going to want to get that resolved as a priority. Our overdue account recovery service can get your unpaid invoices to the top of their “to do” list and get your invoice paid.
Our debt recovery and credit management services give our members the financial freedom needed to grow and prosper, while our new Late Payment Compensation department could unlock hidden potential and offer the compensation needed to springboard your business to success.
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