Profits at Britain's top 100 restaurant groups fall 64% in a year

A third of Britain's top 100 restaurants are now loss-making businesses. Photo / 123RF

Soaring business rates and rising staff costs have squeezed the profitability of Britain's top 100 restaurant groups, with a third now loss-making businesses, according to new research.

Total pre-tax profits at the top 100 firms have plummeted by 64 per cent in the past year, from £345 million ($672m) to £125m, according to the Daily Telegraph.

Accountancy group UHY Hacker Young said that The Casual Dining Group, which owns high street chains Café Rouge and Bella Italia, is one of the most recent to report difficult trading with an 18 per cent increase in losses to May 2017.

The research comes in the wake of several recent high-profile examples of restaurant chains being forced to restructure or undertake large scale closures across their portfolio of restaurants in a bid to cut costs.

The dining industry has been hit with a perfect storm of rising costs, cautious consumers and increased competition in the market.

Major names have capitulated under the pressure, including burger chain Byron, Jamie's Italian, EAT and Strada. Both Jamie Oliver's Italian restaurants and Byron have asked their landlords for rent reductions.

Peter Kubik, partner at UHY Hacker Young, said the restaurant industry had grown "ahead of demand" in recent years and is now going through a period of consolidation and restructuring to remove excess capacity. "The industry's woes should be temporary while it deals with this process, as long as consumer confidence can be maintained," he said.

Mr Kubik added that many struggling restaurants were fundamentally "very sustainable businesses", but needed to shed their "excess branches".

The rise of food delivery app Deliveroo has also had a detrimental impact on restaurants because it has often deprived them of sales of alcohol and other drinks, which typically offer high profit margins for restaurants.