Restaurants remain a risky business

RESTAURANTS in Yorkshire continue to be among the businesses most at risk of distress.

According to the latest research by insolvency trade body R3, in May 2016, while the level of distress among restaurants in the region fell by 1.4% since the previous month, it was still had the highest level of risk of the 10 sectors surveyed with almost 38% of restaurants at higher than normal risk of insolvency in the next 12 months.  

Of the 3,121 active businesses regionally in the sector, 1,176 restaurants were in the negative band and 551 of these were deemed to be at high risk.

The sector is continuing to face challenging conditions across the UK with restaurants in the West Midlands, the East of England and London seeing even higher levels of risk than those in Yorkshire.  The proportion of restaurants considered at higher than normal risk was almost 39% UK-wide, a fall of just under 2% since April, but it was still the sector with the highest level of businesses at risk.

In comparison in Yorkshire, only pubs (36%), and technology and IT (34%) saw similar levels of distress.  However, the region performed more strongly than the national average across many other sectors including manufacturing, hotels and transport and haulage.

R3 uses research compiled from Bureau van Dijk’s ‘Fame’ database of company information to track the number of businesses in key regional sectors that have a heightened risk of entering insolvency in the next year.
 
Adrian Berry, chairman of R3 in Yorkshire and restructuring partner at Deloitte, said: “Traditionally, restaurants are among the most popular choices for fledgling entrepreneurs, and the high number of start-ups in this sector obviously increases the likelihood of business failures.  What’s more, restaurants are also one of the most difficult types of businesses to run successfully, from the challenges of controlling costs and managing staff to coping with pressures on consumer spending.
 
“While the restaurant sector remains one of the most difficult, the picture in Yorkshire has seen a slight improvement and remains a little better than the national average.  It is also encouraging to see the region performing strongly in many other sectors such as manufacturing and hotels, despite the economic uncertainty caused by the ongoing Brexit debate.”
 

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