UHY Hacker Young Group's latest research shows that the number of petitions to wind up restaurants over unpaid bills has jumped to 53 so far this year (to 20 April 2020), up 165% from 20 in the same period last year, with another surge expected to follow once lockdown measures are relaxed.

This jump in petitions only reflects the very earliest stages of the coronavirus crisis, when a drop in high street footfall saw some already-underperforming restaurant businesses fall into insolvency.

The restaurant sector has already been under considerable financial pressure over the last two years, thanks to overcapacity, rising input costs, the increasing minimum wage and a growing shortage of European workers following the Brexit vote. These pressures have led to the collapse of several household-name restaurant groups in recent weeks, including Italian chain Carluccio’s.

The Government recently announced a new temporary ban on the use of winding up orders against businesses that cannot pay their bills due to the Coronavirus crisis. While this will give restaurants important breathing room during their enforced closure, there is likely to be another significant rise in winding up petitions once the ban ends on 30 June.

Many restaurants have managed to hold on through the crisis by furloughing staff and not buying stock to cut costs. Peter Kubik, partner at our London office, says that many will struggle to stay in business when the lockdown ends and costs return to their normal levels.

Kubik said, “The recent jump in winding up petitions against restaurants is unlikely to be the biggest increase we see this year. Once lockdown measures are relaxed and the new temporary ban on winding up orders ends, a lot of restaurants will struggle to stay afloat for long.”

“Restaurants will have an extremely small window to get customers back through the door before restart costs deplete cash and send them into insolvency. They are especially at risk being one of the last sectors to return to normal activity.”

(source: UHY)