Report: More than one in 10 UK restaurants facing insolvency

More than one in 10 restaurants in the UK are reportedly at risk of imminent closure as operators continue to struggle with weak consumer confidence and persistently high inflation, as well as fresh concerns over the impact of Labour’s inaugural budget.

According to research from accountancy firm Price Bailey, 12 per cent of UK restaurants “have a “Delphi Risk score in the Maximum Risk category” - meaning they are at imminent risk of being forced to close.

Price Bailey analysed the credit risk scores and balance sheet information for all of Britain’s 50,900 restaurants. The research found that 20 per cent (close to 10,400) had negative net assets on their balance sheets – meaning they are regarded as “technically insolvent”.

Discussing these restaurants, a Price Bailey representative stated: “These businesses are vulnerable to going bust (cash flow insolvent), which occurs when businesses are unable to make payments to suppliers or lenders."

6,128 of these restaurants, 12 per cent of the UK total, were designated as being at maximum risk. This was up 1,172 compared to the same figure a year earlier, when 4,956 “technically insolvent” restaurants (around 10 per cent of the UK total) were classed as being at maximum risk.

According to the report, businesses at maximum risk "find it difficult to access funding without personal guarantees from directors and are highly likely to be subject to winding up petitions or intention to dissolve notices in the next 12 months.”

Discussing the state of the restaurant industry, the report continued: “Restaurant closures are currently running at their highest level in over a decade, smashing the previous decade-high total set only a year previously. 1,409 UK restaurant businesses entered insolvency in 2023/24 (year ending 30 September 2024), up from 1,180 in 2022/23, beating the previous decade-high total by 19 per cent.”

Price Bailey’s Head of Insolvency and Recovery Matt Howard stated that, unlike in the majority of other sectors, hospitality insolvencies are continuing to rise, with a sharp increase in restaurant insolvencies over the past six months.

Howard added that the figures indicate the sector’s struggles are likely to continue, saying: “More than one in 10 restaurants are technically insolvent with maximum credit risk scores, which means that roughly half of them will close in the next 12 months.”

He continued that such businesses will find it “almost impossible” to access much-needed funding, unless owners provide personal guarantees, which he adds that “few are likely to do in the current climate.”

The challenges facing the restaurant sector have seemingly intensified in the wake of the Labour party’s first Budget at the end of October, which saw increases in employer’s national insurance contributions and the minimum wage. According to Howard, uncertainty over the budget even harmed the sector prior to the announcement, denting consumer confidence and undoing the positive impact that lower interest rates were having on the sector.

Howard added: “The sharp acceleration in inflation in October may well delay further rate cuts and will act as a drag on restaurants as we approach their busiest time of the year.”


Find out more about how the Budget might impact UK insolvency levels

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