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UK Restaurants, Department Stores and Supermarkets Suffer Further Pains

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This year has had a brutal start for businesses in the United Kingdom, and it’s still barely started.

The closures began with department stores and retail chains, followed by supermarkets, now restaurants.

Tough Start to 2018

The holiday shopping season was a modest one throughout the U.K. Many retailers hoping to recover from slow sales were unable to do so. It didn’t take long for Maplin to shut its doors and, more recently Toys R Us. Fashion retailer New Look has also announced its intentions to shut down 60 of its locations, only barely keeping its head above water as it lays off 1,000 employees.

One quarter of Debenhams’s management are finding themselves unemployed. Marks & Spencer, Tesco and a spectrum of grocery stores are also cutting back on workers. John Lewis and Waitrose parent company, the John Lewis Partnership, also recently announced that last year’s profits had fallen by 77 percent.

Restaurants Following the Trend

Until now, supermarkets and large retail chains have appeared to face the majority of the struggle. However, it is becoming clear that restaurants are becoming the next victims of this trend. Restaurant chains have been hit particularly hard.

Over the last few weeks, Prezzo, Byron Burgers and Jaimie’s Italian have all started shutting down locations. Prezzo alone closed down 94 of its restaurants. It is unclear as to how many will actually survive their restructuring and downsizing. Posh Carluccio recently met with its accountants in order to “assess its options.” The Bella Italia and Café Rouge parent company, Casual Dining Group, announced that it lost £60 million in the year ending May 2017.

Costs Continue Rising

Retailers and restaurants have faced increasing challenges due to rising costs. Even as consumers slowed their shopping, government-imposed cost increases upped the struggles. The national living wage rose, the apprenticeship levy for employers with a higher-than £3 million wage bill, and increased pension contributions made operations more costly.

Restaurants were hit particularly hard by the dropping value of the pound. Following the Brexit referendum, the decreased value of their currency has made ingredients considerably more expensive.

That said, it should be pointed out that many chains had been expanding very rapidly, placing them at an increased risk of failure from unanticipated shifts in the market. In 2014, the number of restaurants employing more than ten people increased by 13 percent. In 2015, that number rose by another 10 percent. Even last year it kept up a sturdy 7 percent. Many feel the market has saturated itself, particularly when it comes to Italian style restaurants in the mid-market range.

Note: The opinions expressed in this article are the author's own and do not necessarily reflect the view of Alvexo on the matter.