tutor2u | Restaurants face closure as costs rise and demand dips

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Restaurants face closure as costs rise and demand dips

Geoff Riley

5th December 2016

Restaurants open, restaurants close - that is a fact of life in the food retail industry. But the commercial future for thousands of restaurants in the UK is under threat according to a new report from accountancy firm Moore Stephens reported here in the Guardian. A perfect storm of rising operation costs and flat-lining or declining demand is threatening to push many outlets below their shut-down point.

From a business economics perspective, the article provides some excellent synoptic content:

  1. The depreciation of sterling is increasing the costs of imported food and wine - Britain imports 48% of the food we consume
  2. The rise in the national minimum wage / living wage is contributing to higher labour costs
  3. Commercial rents in many cities and especially London continue to rise - a significant overhead cost for many restaurants
  4. The squeeze on real disposable income is hitting demand with more people choosing to stay home rather than book a table, or eat out less frequently
  5. The restaurant market in major cities resembles monopolistic competition. The arrival of new restaurant concepts threatens to squeeze demand for existing brands and turn narrow profitability into operating losses

Geoff Riley

Geoff Riley FRSA has been teaching Economics for over thirty years. He has over twenty years experience as Head of Economics at leading schools. He writes extensively and is a contributor and presenter on CPD conferences in the UK and overseas.

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