Restaurant closures on the rise - is the industry at boiling point?

Rarely a week goes by without the sad news of another restaurant closure. Unfortunately, this is a trend that shows no sign of slowing down. Between May 2021 and May 2022, restaurant closures across the UK increased by 64%, working out at around 120 closures on average every month.

The combined factors of Brexit, Covid and inflation have had a devastating effect on the restaurant industry. 

The impact of Brexit

The hospitality industry employed more than 400,000 migrant workers before Brexit, with almost 75% of London's hospitality workers coming from the EU. But the practical challenges of Brexit have made the UK a markedly different employment market for EU workers, as EU citizens who wish to move to the UK will be subject to the same rules as citizens from the rest of the world (with the exception of Irish citizens).

All in all, there has been a 41% decrease in the number of EU citizens working in the UK hospitality sector since 2019.  According to recent figures from the Office of National Statistics, there are currently around 170,000 hospitality jobs available (a record figure) and over 80% more vacancies than in May 2019. The highest number of vacancies are in front of house and chef positions –key roles needed to run a restaurant.  With a shortage of integral team members, businesses are finding it much harder to maintain standards and provide quality customer service.

As well as staff shortages, Brexit led to a 6% increase in food prices. According to 'U.K. in a Changing Europe,' a think tank led by LSE, the Covid pandemic was not a factor contributing to the price hike, and 'major disruption' to UK trade within the UK is to blame.  These increased prices have put a squeeze on restaurants already struggling to make ends meet.

Covid

Twelve months of coronavirus lockdowns (between March 2020 and March 2021) disproportionately affected the hospitality sector, with the industry's economic output falling by 42% in 2020. Such extensive disruption left businesses with depleted cash reserves and unsurmountable debt, leaving many restaurants with no option but to close their doors for good. 

Government support for the industry included the 'Eat Out to Help Out' scheme, whereby government-subsidised discounts on food and non-alcoholic drinks were offered in certain restaurants and cafes.  By the end of September 2020, over 160 million meals had been discounted, working out at £849 million claimed.  Despite providing a temporary boost in restaurant footfall, the scheme failed to have any meaningful long-term impact. Unsurprisingly, the increased demand was limited to those days when a discount was available, and demand dwindled once the scheme ended.  Further, the increased footfall caused by the scheme may have had an adverse effect on the spread of Covid, meaning that any temporary economic gains might have come at the cost of public health.

Inflation

Just when you thought things couldn't get worse for the restaurant industry… they did.  The UK's inflation rate reached 11.1% in October 2022, influenced by the increased cost of consumer goods, supply chain issues and an increase in wholesale food prices.  As of November 2022, UK food price inflation hit a record high of 12.4%. Energy prices have also increased sharply - caused by global factors, including Russia's invasion of Ukraine

As well as the direct effect on restaurants struggling to meet the increased costs of food and energy, the increased cost of living has reduced consumer spending.  The UK is not currently in an economic recession (although this has been forecast), however consumer confidence is currently weaker now than during the last four major recessions. This means that consumers are pessimistic about their own economic situation and are therefore less likely to spend money on non-essential purchases.  For businesses that rely on consumer spending, like restaurants, the outlook is disheartening.

So, what can be done to help? It's hard knowing what to do as a consumer, particularly when we are all feeling the pinch. However, if you're in a position to do so, here are some ways we can support the restaurant industry:

• Stay local and independent – smaller businesses often need support;
• Don't forget that restaurant vouchers can make great gifts;
• Order takeaways if you can, whether this is directly from the restaurant, or via a delivery service; and
• Don't forget to treat yourself and loved ones – if the last few years have taught us anything, it's that we must make the most of spending time together.