Restaurant closures hit ten-year high

"Our members are reporting energy costs up 80 per cent year-on-year, food price inflation for hospitality up 22 per cent and, on top of this, rising interest rates are compounding the pressure on those businesses that have had to take out loans in order to survive."

Alongside Nicholl's warnings of energy price hikes and high food inflation, Price Bailey has also warned that the rate of closures is only to get worse.

It cited reasons including the cost-of-living crisis which is leading to consumers cutting back on eating out, but pointed to the cumulative effect of interest rate rises, with more potentially to come, that is pushing indebted restaurant businesses into insolvency.

The report noted rising interest rates increasingly leave highly leveraged businesses in the restaurant sector unable to meet loan repayments. At the same time, banks are clamping down harder on non-performing loans and shifting, instead their focus to those with growth prospects.

However, despite the rise in restaurant closures, separate data from the Office for National Statistics commissioned by Price Bailey reveals optimism among restaurant owners is rising.

A third of British restaurants are reporting turnover is rising, rather than falling, marking an improvement on six months ago when just 16% were reporting rising turnover compared to 37% who said it was on the decline.

Matt Howard, head of the insolvency and recovery team at Price Bailey, said, while there are early signs of an improvement in trading conditions for restaurants, the improving economic outlook "may come too late" for many restaurant businesses.

He added: "There is often a lag between a return to more robust economic activity and declining insolvencies. Banks will likely start to put increasing pressure on debtors to perform or pay off loans. Focus will start to shift from financially stressed businesses to startups and those with better prospects, which may mean that insolvencies continue to rise despite many restaurants seeing improved takings."

It comes after news that Le Pain Quotidien has closed all but one of its UK sites and entered administration with the loss of 250 jobs, and Prezzo is to close almost a third of its restaurants after its restructuring plan was approved by the High Court.