Scottish restaurants face crisis as closures quadruple in ten years

The number of Scottish restaurants to go bust has almost quadrupled in the past ten years, a report has claimed.

A total of 73 food businesses collapsed last year – well over one a week – according to analysis of Insolvency Service statistics, compared to just 19 in 2007.

Accountants and business advisers French Duncan LLP found that 76 food businesses failed in the first six months of this year, three more than for the whole of last year.

Changes in the restaurant sector, such as a rise in people using takeaway delivery services such as Deliveroo, a trend for cut-price vouchers at chain establishments and growth in the pub food sector, had resulted in difficult conditions for businesses, the study said.

Meanwhile, restaurateurs reported that the increase in popularity of street food popups, as well as difficulties in finding staff, had also been a factor.

Eileen Blackburn, head of restructuring and debt advisory at French Duncan, said: “These figures highlight the difficulties that the restaurant sector in general and specifically in Scotland, is experiencing.

“That the number of failures has almost quadrupled over the last decade is alarming but that the rate of failure is increasing is extremely worrying. The high street is in trouble and the dining sector is encountering unprecedented issues which are resulting in failure for a growing number of operators.”

She said that the figures are likely to be “the tip of the iceberg as far as restaurant closures are concerned” and said the market was “precarious” for restaurant operators.

She added: “Far more restaurants close without entering into a formal insolvency process, so the numbers struggling on a day-to-day basis must be huge. The numbers closing voluntarily at a financial loss must be enormous and show just how competitive this market is. Opening a restaurant has always been difficult but there are greater complications with high rents, high rates, increased staff costs and, for those importing ingredients, higher supply costs.”

Restaurants accounted for 8.6 per cent of all corporate failures in Scotland last year, rising from 3 per cent of all failures in 2007, French Duncan said. Over the past three years, 234 Scottish restaurants have gone bust which equates to one restaurant entering insolvency every five days between 2015 and 2017.

A number of national restaurant chains have been hit by financial woes in recent months. Prezzo, Jamie’s Italian and Byron are among a number of companies which announced a raft of branch closures amid economic problems. Meanwhile, a report published in March by UHY Hacker Young found that profits for the UK’S top 100 restaurant groups plummeted 64 per cent over the previous year.

The French Duncan report pointed to over-capacity in the sector. It said that many restaurants have become “slaves to the discount voucher market” to compensate, but warned that this could lead to a permanent lowering in revenue as savvy consumers shop around for the next deal rather than being loyal to a particular venue.