A Challenging External Environment Puts Pressure on UK Restaurants

This BBC Business articleon the difficulties being faced by the UK restaurant market is full of topical examples of how the external environment can threaten seemingly well-established and successful businesses.

It appears to be a combination of external factors which are challenging restaurants.

For example, cost pressures from rising ingredient prices, particularly those sourced from the EU after the Pound fell in value against the Euro following the Brexit vote.

Remember SPICED: STRONGER POUND; IMPORTS CHEAPER, EXPORTS DEARER.

Well, restaurants are facing the reversal of SPICED. WEAKER POUND, IMPORTS DEARER, EXPORTS CHEAPER

There are other cost pressures too arising from changes in the external environment that restaurants have to absorb. The apprenticeship levy; rising rents and local authority rents.

On the demand side, weakening consumer confidence means we are spending less on eating out (but we're increasingly happy to order a takeaway).

All of which makes it harder for restaurants to pass on rising costs to customers through higher menu prices.

The article also highlights the over-capacity in the industry generally. Put simply, there are too many restaurant chasing too few customers.

So perhaps we can expect to see many more restaurant closures, particularly by the larger chains, in the short-term.