37 of the UK’s top 100 restaurant groups are loss making, says report

29-Oct-2018 - Last updated on 26-Apr-2021 at 16:19 GMT

Profits at the UK’s top 100 restaurant groups fell a whopping 80% in the past year, according to new figures from accountancy firm UHY Hacker Young.

Total pre-tax profits at the UK’s Top 100 restaurant groups fell from £194m 12 months ago to just £37m, says UHY Hacker Young, based on accounts filed with Companies House as of September 30 2018, compared with those filed the previous year.

Of the UK’s Top 100 restaurant groups, 37 are now loss making.

The drop means that pre-tax profits at the UK’s top 100 restaurant groups have now fallen 89% from £345m since the first quarter of 2017, says UHY Hacker Young.

The fall in profit highlights the ongoing challenges faced by the casual dining sector, including higher business rates, a rising minimum wage and increasing utility costs.

The figures come amid a turbulent year for a number of casual and mid-market restaurant groups, with high-profile casualties including Jamie’s Italian, Carluccio’s and Gourmet Burger Kitchen, all of which have initiated company voluntary arrangements (CVA).

Household name groups including Gaucho, Strada, and Prezzo have all shut a number of restaurants in recent months as the casual dining sector deals with overcapacity.

“The downward spiral in profits of restaurant groups reflects the severe difficulties that continue to impact the sector,” says Peter Kubik, partner at UHY Hacker Young.

“Despite the long-term benefits, closing down restaurants is often hugely expensive in the short term. For some struggling restaurant groups that means things will get worse before they get better.”

The company points to a number of restaurant businesses that are defying the downturn, including Wagamama, which opened seven new UK restaurants this year, and Leon, which is expanding into Europe. It insists consumer demand for casual dining is ‘still present’.

“The restaurants that are doing better are those who are innovating by offering their customers something unique,” says Kubik.

Despite the pain being felt by many major restaurant operators, branded restaurants are continuing to grow their share of the market, according to a recent report from research agency MCA Insight.

It reports that group restaurant operators are growing their businesses at a time when the overall restaurant market is seeing turnover decline.