Credit Management magazine December 2017

Rising costs threaten survival
of UK restaurants
A fifth of UK restaurants are at risk of going
insolvent according to new figures from
Moore Stephens, which warned that rising
staff costs and food prices were putting a
strain on operators.
The research showed a total of 14,800
restaurants were faced with the prospect
of going under, not helped by a weakening
pound. The pound has decreased in value
by over 13 percent against the euro and 12
percent against the US dollar since the UK
voted in a referendum to leave the European
Union last year, Moore Stephens said.
Since the UK imports over half of its
food, with 75 percent coming from the EU,
restaurants have been faced with a decision
to either raise their prices or reduce their
profit margins. The National Living Wage
also increased to £7.50 an hour in April, up
from £6.70 in 2015, and will rise to at least
£9.00 an hour by 2020.
Moore Stephens also cited business rates
as a factor. A recalculation of rates has seen
restaurants in London facing a maximum
42 percent increase in business rates in
the first year, according to the Mayor of
London’s office.
Byron, Prezzo and Jamie’s Italian have
all closed outlets in the past year owing
to tough trading conditions. Handmade
Burger Co went into administration earlier
this year, further highlighting the problems
facing the sector. Insolvency Service data
shows that the number of restaurants
entering insolvency has increased by 13
UK insolvency slips in
worlds rankings
THE UK Government needs to kick-start
its stalled corporate insolvency reforms in
the wake of the UK insolvency framework
falling from 13th to 14th in the World Bank’s
rankings, according to the Association of
Business Recovery Professionals R3.
R3 is warning that with other countries’
insolvency and restructuring frameworks
improving, and with Brexit potentially
creating barriers to resolving crossborder
insolvencies from the UK, the UK
is at risk of seeing its current competitive
advantage in international insolvency and
restructuring diminish unless reform efforts
are renewed. A less competitive insolvency
framework would have a detrimental
impact on the wider economy.
The Government announced insolvency
reforms in May 2016, but limited progress
has been made since. The Government is
yet to respond to its own ‘call for evidence’
on the reforms, which closed in July 2016,
while plans for reform were absent from the
Queen’s Speech earlier this year.
Adrian Hyde, R3 President, says
corporate insolvency reform should be a
priority for the UK: “We currently have a
world-class insolvency and restructuring
framework, but we can’t stand still. Others
percent in 2016/17 to 1,544 from 1,363 in
2015/16.
Jeremy Willmont, partner at Moore
Stephens, says the sector is one of the
most competitive for a business to survive
at the best of times and current market
conditions make it even tougher: “The
increase in the number of insolvencies in
the last year is indicative of how difficult the
market conditions are now. Finances can be
uncertain in the restaurant sector, but this is
beyond the norm.
“In such a competitive market,
restaurants need to be wary of building
up losses and debt now in the hope of
future profits, as the industry looks to be
facing a prolonged period of tough trading
conditions.”
moorestephens.co.uk
are catching up to us and over-taking. EU
member states and places like Singapore
have embarked on ambitious insolvency
reform projects in a bid to tempt investment
and businesses to their countries.
“Meanwhile, the UK Government has
gone cold on its own reforms, and Brexit
risks making it harder to resolve the
insolvencies and restructurings of large,
multi-national companies from the UK.
Insolvency reform would be a welcome step
to making sure the UK economy is prepared
for Brexit. It’s not something we can leave
until after we have left. That might be too
late.
“An effective insolvency and
restructuring framework is an absolutely
vital part of any economy. It helps
rescue businesses and jobs, and provides
lenders, investors and trade creditors
with confidence that they can get at least
some of their money back when things
go wrong. The flexibility and practicality
which underpin the UK’s insolvency and
restructuring framework help to attract
business to the UK; if we don’t continue to
improve the framework, the whole economy
will suffer.”
r3.org.uk
>NEWS
IN BRIEF
SINGING FROM
THE VALLEYS
THE Secretary of State for Wales Alun
Cairns has called on Welsh SMEs to take
advantage of the new UK governmentbacked
export finance opportunity to help
gain access to global growth markets.
The Secretary of State highlighted
the new UK Export Finance (UKEF)
partnership – supported by five high street
banks – which is designed to enable Welsh
SMEs to access support directly from their
bank in seconds, without needing to apply
separately.
The fund will support businesses such as
those on the Fast Growth 50 list to become
part of major export contracts around the
world. Since it was established in 1999, the
551 companies that have featured on the
list are said to have created over 34,000
jobs and generated an estimated £18 billion
for the Welsh economy.
gov.uk/government/organisations/ukexport-finance
SMES RESIGNED TO
HARD BREXIT
MORE than a third of UK SMEs (35 percent)
are resigned to a ‘hard Brexit’, according to
Bibby Financial Services and its latest SME
confidence tracker which has reported
a fall in confidence following prolonged
negotiations between the UK and the
European Union.
The survey found that just 20 percent
of SMEs expected Brexit to be achieved
by March 2019. The vast majority of SMEs
(71 percent) were clear that Brexit would
happen, with 51 percent anticipating a
transitional phase before the UK can leave
the European Union.
Figures also revealed that 26 percent
of SMEs felt that an uncertain economic
environment in the UK was holding back
investment, with other barriers including
rising costs, declining sales, building up
cash reserves, and uncertainty arising from
the exit from the EU.
bibbyfinancialservices.com
The Recognised Standard / www.cicm.com / December 2017 / PAGE 7