31 per cent growth in restaurant administrations

The past year has seen the number of restaurants going bust rise by almost a third (31 per cent), recent figures have confirmed.

Compiled by chartered accountants and business advisory firm Wilkins Kennedy, the data found that the past year saw the highest number of insolvencies since the first quarter of 2009 and blamed VAT and rises in minimum wages for the problems.

A total of 684 restaurant businesses became insolvent in 2011, 19 per cent more than in 2010. The last quarter of the year accounted for 194 of these, a substantial jump on the 148 recorded in the last three months of 2010.

Anthony Cork, partner at Wilkins Kennedy, commented: “It is the proverbial 'perfect storm' but the sheer number of restaurant groups that have been sunk by it is still surprising.

“When income is falling businesses can normally bail themselves out by cost cutting - but restaurants have a very high percentage of their costs fixed by the property leases that they have to sign with their landlords.”

He added that rents will only ever go up for restaurants due to the terms included in the vast majority of leases. This is the case even if the real rental value of the restaurant has fallen, which leaves many businesses in a risky position during difficult economic times.