With Jamie Oliver earlier this year announcing the closure of six of his restaurants, 2017 looks set to be a challenging year for the sector and retail generally.
The cost of labour will increase in April following an increase in the minimum wage which dovetails with a revaluation of business property which may lead to significant increases in business rates particularly for businesses in London and the South East. The impact of Brexit on the value of sterling and the resulting increase in the cost of imports have squeezed margins as restaurants are reluctant to pass on increases in costs to their customers given the ongoing stagnation in disposable income.
Where cash flow is tight, invariably payment of tax and VAT slips down the order of priority and can quickly become unmanageable. In the recent past we have seen HMRC being quick to commence recovery proceedings and instruct enforcement agents to attend premises to recover the debt or remove assets which can lead to the cessation of trade.
There are opportunities for restaurants that are innovative and offer new dining experiences or that embrace new technologies such as on-line offerings or new consumer convenient ways to pay. If there is a business or brand worth protecting, it is essential that early advice is taken as options quickly become limited once recovery action has been commenced.