UK's top restaurant groups still in 'danger zone' despite profit bounce

The UK's top 100 restaurant groups have returned to profitability after four years of losses but remain in a "danger zone", an accountancy firm has warned.

Research from UHY Hacker Young showed that restaurant groups made £19.9m in profit in 2022 compared to a £673m loss in 2021, a £246m loss in 2020 and a £228m loss in 2019.

Peter Kubik, partner at UHY Hacker Young, said some of the bounce back was driven by restaurants scaling back on expansion plans that had been stalled by the pandemic.

However, because the profit margin is less than 0.5% on a turnover of £5.2b, the group raised concerns that the cost of living crisis could slow recovery.

Last November, Mazars reported that restaurant company insolvencies increased by 59% over the year, rising from 984 to 1,567.

Kubik said: "The UK's top restaurant chains finally posting a profit, however small, is a welcome surprise.

"The industry has done a good job in trimming costs and getting back on the path to profitability but it's now facing a new challenge having to deal with increasing inflation and rising interest rates."

He added: "It would be wrong to assume that the restaurant sector is now out of the danger zone. The many headwinds the sector is facing means they will still face further challenges."

Kubik said that better performing restaurant groups were quick to cap borrowing costs through the use of derivatives, as well as fixing long-term energy prices with suppliers.

It comes after chancellor Jeremy Hunt told business groups, including UKHospitality and the British Beer and Pub Association (BBPA), that the current level of energy bill support for businesses is "unsustainably expensive" and cannot continue at its current rate.

Hunt is expected to set out the future of energy support in the House of Commons this week.

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