Supply chain · 5 December 2016

Thousands of UK restaurants face closure from rising import costs

Restaurants
The number of restaurants in Britain has grown by 23 per cent since 2010

The growing cost of importing goods into Britain as a result of the declining value of sterling could lead to the closure of thousands of small restaurants, an accountancy firm has warned.

According to Moore Stephens accountants, 5,570 UK restaurants have at least a 30 per cent chance of folding within the next three years, as the financial burden of bringing in food and wine from overseas increases.

The political fallout following the result of the EU referendum in June has resulted in continued economic uncertainty, and the value of the pound has dropped to ten per cent less against the Euro than before the Brexit vote.

The pound’s weakness against the Euro could mean that eateries serving Italian and French cuisine could be most at threat from costly imports. Further, as the UK fails to strike European trade deals VAT costs could also rise, meaning border agencies would be required to add on the World Trade Organisation’s set VAT rate of 20 per cent on all imports.

Commenting on the firm’s predictions, Moore Stephens’ business restructuring partner, Mike Finch, warned that small restaurant owners were having to compensate for blows to their margins from several directions and needed to balance the books without losing custom.

“It’s been a tough year for many restaurants in the face of rising costs and fierce competition. It is unrealistic to expect UK restaurant groups to avoid the impact of the fall in the pound by substituting for UK produce – they are going to face a big hit.

“Restaurants have to make tough decisions as to how much they try to pass on to consumers; too much and they risk losing business, too little and they lose margin,” he said in a statement.

Growing labour costs as a result of the minimum wage increase in April, combined with declining disposable incomes of customers, have contributed to the squeeze, while stronger competition has also impacted on the profitability of smaller restaurants.

According to recent figures from the Local Data Company, the number of restaurants in Britain has grown by 23 per cent since 2010, while Moore Stephens suggests that 200 opened in London in the last year alone.

The Nationwide Caterers Association has stated that opening a bricks and mortar restaurant can cost over £50,000, and many entrepreneurs are spotting affordable alternatives to getting their food businesses off the ground.

It is reported that there are now over 7,000 street food vendors operating in the UK, and with low startup costs and minimal overheads – Streetfood.org.uk suggests that daily rents are as low as £30 to £100 – it is a business-model increasing in popularity.

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ABOUT THE EXPERT

Simon Caldwell is a reporter for Business Advice. He has a BA in politics and communications from the University of Liverpool, and previously worked as a content editor in the ecommerce industry.

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