Busy tables, empty profits as hospitality crisis deepens

Restaurants may look packed, but behind the scenes many are fighting for survival. Rising taxes, soaring energy bills, higher wages and stubborn inflation are squeezing already tiny margins, leaving even award-winning chefs shutting their doors. Hospitality bosses warn that unless ministers act on VAT and business rates, Britain risks losing not just restaurants and jobs, but the culture, skills and communities that make our high streets worth visiting.

RESTAURANT BUDGETS CAN’T SURVIVE GOVERNMENT BUDGETS

You could be forgiven for thinking all the hype about the demise of the hospitality is just that: hype. It could be restaurant version of the famous Mark Twain quote: “Reports of my death have been greatly exaggerated”. However, while restaurants might look booming, with packed dining rooms, waiting lists, and Instagram feeds full of fancy plates, behind the kitchen doors, the industry is on its knees. Even the busiest spots are struggling to survive.

Michelin‑listed chef Richard Wilkins, recently shut his west London restaurant after seven years. Bookings were steady, the food was praised, but the sums were brutal. “Looking at the bookings coming in, compared to the rising costs, it just didn’t add up anymore,” he said. He’s not alone.

Across the UK, three hospitality venues are closing every day. Since 2021, London has lost 24 Michelin‑starred restaurants, and more than a fifth of all Michelin‑starred venues in England and Wales have vanished since the pandemic. The boom years are over, and the bills are killing the industry. If that’s what the current economic situation, coupled with Government policies, is doing to the topflight places, the impact on the local neighbourhood venues is even more brutal.

PACKED DINING ROOMS, EMPTY BANK ACCOUNTS

Being busy no longer means being profitable. Restaurant costs are soaring, but owners can’t put the prices up beyond what their customers can afford to pay. Customers are eating out less often, spending less when they do, and restaurants can’t raise prices fast enough to stay open.

TV chef Tom Kerridge, who runs five high‑end restaurants, has been quoted as saying guest numbers are down 15–20% and spending is down the same again. There’s not much profit to be made in that scenario. Small restaurants are working on similar figures and it’s not sustainable.

THE FIVE COSTS CRUSHING RESTAURANTS

Five pressures are wiping out the microscopic margins restaurants rely on:

• Food inflation
• National insurance increases
• Minimum wage hikes
• Sky‑high utility bills
• Business rates

Each one chips away at profits. Together, they wipe them out entirely. And then there are the bills. Monthly energy bills have soared and restaurants are energy intensive businesses. The stress is so severe that owners are becoming ill and being forced to close. Not being able to make ends meet, or pay your people, causes mental health problems in small business owners.

TURNOVER IS VANITY, PROFIT IS SANITY

Some restaurants still look packed. Being full no longer guarantees making money. It’s the great illusion of the hospitality crisis: diners see busy rooms, but they can’t see the dire figures lurking behind the office door.

RESTAURANT BUDGETS CAN’T SURVIVE GOVERNMENT BUDGETS

A surprising number of restaurants survived the 2008 crash and the pandemic. The latest tax changes are bringing them down now. Many owners say they weren’t losing money until the last two budgets. A small restaurant that was one of 5 in the same street was paying £150,000 a year in VAT, plus national insurance, plus business rates. That’s a huge contribution to the UK economy. Now it’s closing, and the others on the street are facing the same choice. The knock‑on effects are huge: fewer staff, fewer suppliers, fewer local businesses supported. A whole ecosystem collapses and the Treasury loses all that income.

THE FUTURE OF BRITISH FOOD IS AT RISK

At the risk of pointing out the blooming obvious: if closures continue, our food revolution which turned us from a culinary laughingstock into a global cuisine powerhouse, could go into reverse. Skills will disappear and standards will fall because the only way to stay open is to cut costs and buy inferior products. Our hospitality sector which is worth billions to the economy will collapse or become so expensive that people who would love to go out and spend money, will be forced to stay at home.

THE BOTTOM LINE

Restaurants may look busy and buzzy, but the numbers don’t work. Unless the government steps in, as restaurant owners are calling on them to do, and cut VAT and business rates, the UK risks losing not just restaurants, skills, and yet more entry level jobs and training, but the culture, creativity and community that come with them.

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