A total of 3,347 eateries have been unable to pay their debts in the past two years to March 2023, according to data from the Insolvency Service and first reported by Sky News.
During the first three months of 2023, an average of six restaurants were affected every day.
Of those restaurant declared insolvent, 98% of cases have ended with the business being shut down.
Research by UKHospitality shows that the number of restaurants in Britain has declined by 3,415 since March 2020 – a fall of 18%.
“We’re really facing a perfect storm,” says UKHospitality CEO Kate Nicholls. “These businesses faced a challenge going through COVID, and as a result of that they’ve got very high levels of debt. So, interest rate rises have impacted on their ability to remain viable.”
This latest research follows recent figures from accountancy firm Price Bailey, which revealed that restaurant closures reached the highest quarterly figure in a decade in the first quarter of 2023.
The Bank of England said in a report on Wednesday (12 July) that insolvencies are likely to rise further as high interest rates and a “subdued economic outlook” continue to take effect.
It said that companies facing interest payments of more than 40% of their annual revenue are ‘materially more likely to experience repayment difficulties’.
By the end of this year, the share of medium-sized companies beyond that threshold is expected to hit 70% - the highest share since 2009.
Interest rates on new loans for small and medium-sized businesses have more than doubled in the past year, rising from an average effective rate of 3.4% to 6.9%.
