UK's Top 100 restaurant groups return to profitability
The UK’s Top 100 restaurant businesses have finally returned to profit, making £19.9m of profit in the last year, up from a loss of £673m a year ago, according to research by accountacy group UHY Hacker Young.
This represents a profit margin of less than 0.5% on a turnover of £5.2billion. UHY Hacker Young warns that even those slender profits could be challenged by the cost of living crisis which is pushing up restaurants' costs and denting consumer spending on leisure.
Peter Kubik, partner at UHY Hacker Young, explains that the return to profits in the UK’s restaurant sector follows four years of losses and major restructuring among restaurant groups that had overexpanded and then been hit hard by Covid. Many of those restructuring programmes, which incurred substantial write-downs, have now come to an end.
Kubik says: "The UK’s top restaurant chains finally posting a profit, however small, is a welcome surprise.
"The industry has done a good job in trimming costs and getting back on the path to profitability but it's now facing a new challenge – having to deal with increasing inflation and rising interest rates.
"Other restaurant groups which were barely keeping afloat have now closed their doors. Despite their best efforts, some restaurants were not able to balance the books, leading to a 59% increase in restaurant insolvencies in the past year, from 984 to 1,567**.
"It would be wrong to assume that the restaurant sector is now out of the danger zone. The many headwinds the sector is facing means they will still face further challenges."
Kubik explains that some of the better performing, larger restaurant groups have been quick to use derivatives to cap their borrowing costs and agree longer term fixed price energy agreements with energy suppliers.
Source: UHY Hacker Young
*Top 100 restaurant companies ranked by revenue. Based on an analysis of company accounts filed as of 30 September 2022
**12 months to 30 September
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