One Scottish restaurant went bust every five days between 2015 and 2017, marking a quadrupling of insolvencies in the last decade, according to accountants and business advisers French Duncan.
The firm reported that annual restaurant failures have risen from 19 in 2007 to 73 in 2017. The trend is continuing with 76 closures reported in the first six months of 2018 alone.
Eileen Blackburn, head of restructuring and debt advisory at French Duncan, has warned that the situation is likely to be worse than figures show, as some sites will close without entering a formal insolvency process.
She explained: “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.
“Of more concern is that these figures are likely to be the tip of the iceberg as far as restaurant closures are concerned. 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.”
Blackburn highlighted issues with over-capacity in the sector as well as rising costs and outmoded operating models.
The data comes following the immediate closure of the Boathouse hotel and restaurant in Kilsyth, which resulted in the loss of 36 jobs.
The wider financial difficulties facing the casual dining sector were cited as the cause of the business’ collapse.
A string of restaurant groups including Byron, Carluccio’s, Jamie’s Italian and Prezzo have resorted to mass closures and Company Voluntary Agreements in 2018 as the sector struggles with rising costs.