Restaurant failures in Scotland almost quadruple in a decade, new study finds

Eileen Blackburn, head of restructuring and debt advisory at French Duncan LLP. Picture: Ian Georgeson
Eileen Blackburn, head of restructuring and debt advisory at French Duncan LLP. Picture: Ian Georgeson
0
Have your say

The number of restaurants going bust has almost quadrupled over the last decade, highlighting how “precarious” the market is, new analysis has found.

The number of restaurant failures in Scotland has risen from 19 in 2007 to 73 in 2017, according to analysis of Insolvency Service statistics by accountants and business advisers French Duncan.

They found that in the first six months of this year there were 76 failures, three more than for the whole of last year.

Experts said that rising rents and an increase in people using delivery services and discount vouchers was making conditions difficult for restaurateurs.

READ MORE: 10 Scottish restaurants named in UK top 100

Eileen Blackburn, head of restructuring and debt advisory at French Duncan LLP, said: “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.

“I believe that this increase in the number of restaurant failures over the last decade indicates how precarious this market can be for many operators.”

Restaurants accounted for 8.6 per cent of all corporate failures in Scotland last year, rising from 3% of all failures in 2007, French Duncan said.

Over the last three years 234 Scottish restaurants have gone bust which equates to one restaurant entering insolvency every five days between 2015 and 2017.

French Duncan said there is an issue with over-capacity in the sector and rising costs can result in many restaurants simply being unable to continue to operate.

It said that many restaurants have become “slaves to the discount voucher market” to compensate but this can lead to a permanent lowering in revenue as savvy consumers shop around for the next deal rather than being loyal to a particular venue.

Meanwhile, there is also competition from the growth in delivery services and from the pub food market.