Scots restaurant failures rose 86.3% in 2018

The number of restaurants in Scotland going bust last year increased by 86.3%, according to new analysis of the sector by accountants and business advisers French Duncan LLP.

The firm analysed official Insolvency Service statistics and found that annual restaurant failures increased from 73 in 2017 to 136 in 2018 — equivalent to one restaurant going bust every three days.

This is the highest number of restaurant failures on record in any one year.

Restaurant failures accounted for 13.9% of all corporate failures in Scotland last year.

Eileen Blackburn, head of Restructuring and Debt Advisory at French Duncan LLP, said: “A near doubling of the number of restaurant failures in one year is a quite alarming reflection of the state of the sector …

“This is undoubtedly due to the continuing problems faced by the High Street which has seen restaurants and retailers hit badly over the last year.

“The issues facing the High Street continue with high business rates and inflexible landlords contributing greatly to the problem.

“Local councils and landlords must accept that they cannot continue to milk High Street businesses for cash as too often the result are more closures and more boarded up outlets …

“Of greater 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 will be huge.

“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 …

“There is also an issue with over-capacity in the sector, and rising costs have resulted in many restaurants simply being unable to continue to operate.

“Some Scottish operators may also be operating on a model that is now outmoded.

“The discount voucher market which can be a useful tool in the short term also lowers revenue as consumers shop around for the next deal.

“Vouchers can lead to a vicious circle of voucher dependence, lower income, and reduced profitability and, ultimately, closure …

“Many restaurants are also being hit by the growth of delivery services which has opened up an enormous new market from food outlets that never delivered before giving consumers the option of saving some money by eating takeaways at home.

“Equally the pub food market continues to grow both in the form of successful chains and individual outlets allowing for an evening out at less cost than most restaurants can manage.”

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Mark McSherry
Dalriada Media LLC sites are edited by veteran news journalist Mark McSherry, a former staff editor and reporter with Reuters, Bloomberg and major newspapers including the South China Morning Post, London's Sunday Times and The Scotsman. McSherry's journalism has also appeared in The Washington Post, The Guardian, The Independent, The New York Times, London's Evening Standard and Forbes. McSherry is also a professor of journalism and communication arts in universities and colleges in New York City. Scottish-born McSherry has an MBA from the University of Edinburgh and a Certificate in Global Affairs from New York University.