WHY HAVE SO MANY RESTAURANTS CLOSED RECENTLY IN THE UK?

Recent news have indicated that rate of closure of restaurants in the UK has rapidly increased to a worrying level. The number of restaurants seems to have dropped for the first time between 2016 and 2018, since the problem was last noted 8 years after the global economic recession that occurred a decade ago. Brexit has been blamed as the major cause to the rising numbers of the closures of restaurants in the UK. Clearly, the UK exit from the European Union had immediate negative impacts on the economy of the region. However, other major causes have contributed to the problem of restaurant closures in the country. Such factors include the saturation of the market due to entry of many new players in the industry, increasing competition, the rising cost of the operation, and the changing consumer taste and preferences over time.  On this note, Brexit is not the sole factor that has contributed to the problem of UK restaurant closure in the recent times.

Brexit is one of the major reasons that have contributed to the closure of several restaurants across the UK. When Brexit vote was conducted, the rate of the closure of restaurants jumped by 20% in 2017 (Musaddique 2017). The issue of Brexit contributed to tough economic conditions across the UK. The tough country’s economy negatively affected the restaurant sector even making some of the successful hotels to struggle in that industry. A slowed economic performance in the UK caused several restaurants in the food industry to encounter reducing profit margins. Soon after Brexit vote, at least 20% of the restaurants based in the UK, which are equivalent to 14,800 outlets, faced a threat of closing down due to financial constraints. Brexit made the value of pound currency to fall sharply, which hit hard the restaurant industry since it led to the reduction of the profit margins due to price inflation of products. For instance, restaurant chains such as Jamie’s Italian, Prezzo, and Byron closed down their premises last year while Handmade Burger food chain followed the suit in early 2018 (Musaddique 2017). The increase in the number of restaurants closed last year has reflected the harsh financial status of the UK in the post-Brexit period. From this dimension, economic pressure that arose after UK leaving the European Union was unfriendly to the restaurant industry.

The rising financial concerns triggered by Brexit led to major restaurants closing some of their outlets. For instance, Robinson (2018) stated that Jamie Oliver’s Italian restaurant aimed at closing at least 12 of its 37 restaurant outlets located in the UK. The restaurant owners cited the reason for the closure to be financial issues triggered by Brexit. Equally, Prezzo, a restaurant chain for pizza and pasta, targeted to close at least 100 of its 102 restaurant outlets located in the UK due to the financial pressure. The restaurant chain is expected to experience huge losses due to tough economic conditions in the UK in 2018. Further, Byron, a renowned burger chain announced early in 2018 that it was planning to close 20 outlets across the UK to reduce the cost of the operation in the country and survive the tough economic conditions that were caused by Brexit. Moreover, Gourmet pie and mash Group made a statement that it had closed 5 of its outlets that operate in the UK restaurant sector (Robinson 2018). Equally, the number of restaurant openings has reduced due to building financial industry in the region that has affected the consumer purchasing power. In this case, the closure of several restaurant chains in the UK has demonstrated that tough economic conditions caused by the Brexit referendum had an adverse impact on the restaurant industry.

Equally, the costs of the operations were also hiked by the issue of Brexit leading to the decline in the profitability of businesses in the restaurant sector. According to Butler (2018), Brexit contributed to at least 11% rise in the food inflation making some restaurants struggle to operate in the sector. In this case, the cost rise partially related to the Brexit vote has resulted from rising prices of ingredients and the labour cost where employees have demanded for the pay hike to cater for the increasingly tough economic conditions in the UK. The cost of the importation of food ingredients from other European countries has increased due to the changes in customs policies, tariffs, and an increasing devaluation of the pound after Brexit referendum. The increasing cost of ingredients and changes in customs policies in the UK has led to the scarcity of some food ingredients (Weaver 2018). Therefore, the rising cost of operation in the UK has contributed to the increasing number of restaurant closures in the UK experienced in the recent past with cost increase partly caused by Brexit referendum.

However, Brexit is not the only major factor that has contributed to the increased number of closures of restaurants in the UK. Another major factor that has contributed to the increased closure of restaurants in the UK is the increasing cost of the operation in the country. In this perspective, the decision by the government to increase the minimum wage of all workers in the UK has mounted more pressure on the financial status of restaurants. For instance, Musaddique (2017) stated that the British government increased the minimum wage to £7.50 for all employees who are 25 years and above as from April 2017. The wage increase in the restaurant sector has contributed to the increased cost of running restaurants prompting some businesses in the UK to close. In response, a number of restaurants have opted to close some of their sites to reduce the cost of the operation and enhance their survival in the UK market. For instance, Prezzo, targeted to reduce the salary overheads by closing shops to reduce the number of workers. On this ground, government regulations have translated to increasing organizational expenses and profit declines in the market.

Another, reason that has contributed to the closure of several restaurants in the UK is the saturation of the restaurant industry. According to Clarke Bell (2018), the crowded condition of the restaurant industry has made several restaurants in the sector earn extremely reduced profits as the number of restaurant continued to increase. The saturation has forced some of the unstable and poorly positioned companies to quit the market due to a stiff competition. Some of the restaurants have opted to cut the number of outlets to reduce the increasing losses buoyed by the increased spending aimed at wooing more consumers. The high concentration of restaurants in the UK retail sector made consumers have multiple options consequently reducing the level of consumer loyalty contrary to the situation in the past (Clarke Bell 2018). Besides, the customers can bargain for high quality products at the lowest prices in the market, which translates to lower profit margins for organizations. To this regard, the reduced loyalty level of consumers in any eatery has negatively affected their profits and performances consequently phasing out the least preferred eateries in the market. The rapid development of smaller pop-up restaurants has resulted to the decreased earnings of all restaurants regardless of their size, which caused the failure of several restaurants in the UK sector.

Moving ahead, the changing consumer taste and lifestyle trends have contributed to the closure of some of the restaurants in the UK.  According to Clarke Bell (2018), the changing life style trends in the UK have led to changes in the preferences of food. The availability of social media sites has helped to promote the awareness about the diverse food trends consequently changing consumers’ tastes and preferences from to time to time. The social media sites have helped to advocate for sustainable food sourcing, healthy eating, and experiential dining, subsequently changing consumer tastes. Such trends among consumers have exerted pressure on various restaurants in the UK restaurant industry. The changing consumer tastes and preferences on diets have reduced the loyalty of individuals to restaurants, which has contributed to the reducing sales in several restaurant outlets. Clarke Bell (2018) noted that the consumer spending has constantly declined in the past few years due to the trend of consumers getting bored by menus and dinners. In response, several restaurants have been unable to match the fast changing consumer tastes and preferences subsequently losing consumers to other more established and trendy restaurants.

Similarly, the fast changing consumer tastes with regard to food trends has increased the cost of adapting to the change among restaurants in the UK restaurant sector. Several restaurants have been unable to withstand the rising cost of adapting to the changing consumer tastes to remain competitive in the market (Clarke Bell (2018). These changes seem to be capping the rapid growth of the restaurant sector that was experienced in the past leading to sharp profit reductions in that sector. Moreover, the rising number of food delivery companies in the UK has made some consumers to change their preference to take away foods. King (2018) stated that that the huge structural shift to delivery services such as UberEats and Deliveroo has risked the reduction of relationships between consumers and restaurants. When the drivers hired for delivery services take too long, they may prompt customers to select another restaurant that can offer better and faster services. In such a scenario, some restaurants have poor relationships with their customers because of the mistakes of the delivery service contractors, making such restaurants lose their customers to rival restaurants (King 2018). Such drastic changes in consumer trends and constant changes in consumer tastes and preferences have contributed to the reducing profitability of the restaurant sector. Therefore, the rising number of restaurant closures has been caused by the failure of the restaurants to adapt to the changing life style trends and consumer preferences.

In conclusion, several factors, apart from Brexit, have contributed to the increase number of closures of restaurant in the UK. It is indisputable that Brexit has worsened the UK economic situation leading to underperformance of various sectors including the restaurant sector, resolutely triggering the closure of several restaurants in that country. Evidently, high inflation levels have led to low profitability while tariff barriers have translated to a shortage in raw materials. Another factor that has prompted restaurants to close in that country is the rising cost of operations due to high salary overheads, which has sharply reduced the profitability of most restaurants after the increase in the employee minimum wage regulation. Moreover, the changing lifestyle trends and consumer preferences have been difficult for several restaurants to adapt leading to their exit from the market. From a different angle, the market saturation has increased the level of competition the UK retail sector subsequently reducing the profitability of the sector making some of the financially unstable restaurants squeezed out of the market. Therefore, Brexit is not the only factor that has contributed the closure of several restaurants since other factors mentioned above have equally contributed to the deterioration of the UK restaurant industry.

Bibliography

Butler, S., 2018, Number of UK restaurants going bust up by a fifth in 2017, available from: https://www.theguardian.com/business/2018/feb/19/number-of-uk-restaurants-going-bust-up-by-a-fifth-in-2017

Clarke Bell, 2018, Why are so many restaurants closing down?, available from: https://www.clarkebell.com/blog/why-are-so-many-restaurants-closing-down/

King, A., 2018, More pain ahead for struggling UK restaurants, available from: https://news.sky.com/story/more-pain-ahead-for-struggling-uk-restaurants-11270877

Musaddique, S., 2017, Brexit: 20% of UK restaurants at risk of going bust, finds study, available from: https://www.independent.co.uk/news/business/news/brexit-latest-news-uk-restaurants-closing-bust-20-per-cent-leave-eu-a8023576.html

Robinson, N., 2018, Time to go back to the wet-trade future?, available from: https://www.morningadvertiser.co.uk/Article/2018/03/12/Which-UK-restaurants-have-closed-in-2018

Weaver, M., 2018, Most KFCs in UK remain closed because of chicken shortage, available from: https://www.theguardian.com/business/2018/feb/19/kfc-uk-closed-chicken-shortage-fash-food-contract-delivery-dhl