Huge Jump in Hospitality Sector Struggles

It’s perhaps little surprise that since the crushing realities of the COVID pandemic and then the labour crisis that has followed, hospitality has struggled. A transient and highly margin-led industry, it is one of the most vulnerable sectors whenever financial constraints or anything affecting employees rears its head. Add to this the very real problem of inflation and you have a perfect storm that is raining pressure down upon an already fragile set of businesses.

In recent years, we’ve seen a shift from restaurant and café culture, to one of takeaways, ordered digitally and more often and therefore tempting people to dine outside of the comfort of their homes has proven difficult.

It should be no surprise, then, that there has been a big increase recently in the amount of restaurants seeking insolvency or closing down due to financial woes. As support has dried up and labour shortages still exist, it is a tough ask to run a restaurant, especially as standards have shot up, tastes have changed and what people expect has ramped up.

UK restaurant insolvencies have jumped 64% from 856 in 2020/21 to 1,406 in the past year. Consumers are tightening their belts and there’s an emphasis on frugal cooking and regarding a takeaway as a treat. This means less extravagant meals out and even less celebrations which traditionally may have been big money spinners for restaurants and cafes across the UK.

Rick Smith, MD of Forbes Burton, suggests that recovery may well be slow, but restaurants could use this time to build up and replace outdated systems and augment themselves for when recovery does eventually come round.

“There’s a sense that restaurants need to be more of an experience these days. With so much competition and the larger operators showing no sign of slowing down and some of them even diversifying, there’s a lot to be said for standing apart from the crowd. This could be the kind of food served, the way in which it is served within a venue or even a secondary experience or combination of leisure with dining.

“Those who are doing well in this sector are ones that tend to concentrate on their particular niche rather than trying to cater for all. It’s fascinating to see which players are outlasting the stresses at the moment and which are struggling. The number of people tat have either shunned the hospitality industry or avoided it altogether since March 2020 is astonishing.

“As far as the labour market goes, whether recovery occurs remains to be seen. If hospitality businesses don’t have the cash to return to pre pandemic levels of being able to offer perks or high wages, the solution might not present itself quickly.

“We will no doubt see some chains go under, but it is the family-run and individually-owned restaurants and cafes that we should be paying attention to. Often these kinds of places take up valuable and culturally-important real estate, so the question must be posed, is the high street no longer the destination for eating out?”