Words by Christina Dean
There’s been a raft of closures in the first half of the year already
Margot, Pizzeria Mozza, Goodman Canary Wharf and Chick ‘n’ Sours all announced their closure in June; Hora in Mayfair has shut up shop after only two months in business; and Forza Win, Cafe Britaly, The Petersham Covent Garden, Norman’s, Lyle’s, The Gun and Locanda Locatelli are just some of the restaurants that have closed this year alone – and these are just the London casualties.
Still reeling from the effects of Brexit and COVID, it’s been another tough year for the hospitality industry. As well as difficulties in finding staff, operators are now faced with a higher National Living Wage and increased National Insurance contributions, which have gone up from 13.8% to 15%. Rising rents and energy costs means bills are going up across the board.
Customers are also getting squeezed by the cost-of-living crisis, meaning that people are going out less, and spending less. Working from home is now common so the pattern of footfall across the week has changed, as have dining habits – the average time for a booking is now 6.12pm so there’s been a distinct shift towards eating earlier.
It all adds up to a pretty bleak picture. A May survey by UKHospitality has shown that one-third of hospitality businesses are operating at a loss. A recent Business Confidence Survey from CGA by NIQ reveals that 34% of leaders feel confident about prospects for their business over the next 12 months, with 80% of leaders reporting higher wage bills. Government statistics show that insolvencies in the hospitality sector have increased 21% month-on-month at the start of the year. ONS figures show payrolled employees in hospitality fell by over 124,00 in the last year. And we’ve heard from several figures in the industry that fine dining is on its knees. There are rumours of two-star restaurants in the capital doing two to four covers a night, with some of them even closing last minute in the week if there are no bookings, and new restaurants with expensive menus empty night after night.
We spoke to Mandy Yin last year about the challenges of running an independent restaurant, and the constant education needed around why her (very labour intensive) dishes are priced the way they are. “I have to charge what I charge otherwise I go bust,” she explains. “The margins pre-Covid, if you were good, were 15% – 20%, now if you’re lucky it’s like 5%.” And it’s looking even worse now – a “bloodbath” according to Richard H. Turner. “Restaurants get squeezed from every which way, particularly the government, staffing costs are through the roof, taxation, VAT, everything. It’s all just become really hard to make a profit. And you can see when incredibly good restaurants like Lyle’s closes, you know that’s one of the world’s best, it’s right up there in the top 20 or something and definitely one of the best in London. When that closes, you’re like, what?”
Less than a month after Lyle’s announced its closure, and after ten years in business, Chick ‘n’ Sours co-founder David Wolanksi closed both the brand’s restaurants (one in Haggerston and one in Seven Dials), showing that even established businesses are finding it hard to navigate the climate at the moment. “It feels like the whole system is stacked against independent operators as we are being squeezed from every angle — food inflation, rising wages, relentless rent increases, service charges, and soaring utilities without the deep pockets to ride it out. It’s an exhausting, never-ending battle to keep the lights on,” he says. “In the past, you might have offset some of that pressure by raising prices. But right now, consumers are feeling the pinch too — they’re dining out less and watching what they spend. That puts restaurants in an impossible position: you either raise prices and risk losing guests, or keep prices steady and watch your margins vanish. It’s a catch-22, and for many of us, it’s become unsustainable.”
On top of the economics, there’s been a shift in consumer habits that’s also massively impacting David’s business. “Especially among younger audiences, it’s no longer about sitting down for a traditional dinner. Eating is now more on-the-go — from food halls to street food to quick-service spots — or it’s something you do while doing something else, like playing darts, crazy golf, or shuffleboard. Food has become part of the night, not the main event,” he explains. “That hits the casual dining sector — especially those in the £25–£30 per head range — really hard. People are trading down for more frequent, affordable options in the £10–£15 bracket, where they can still get good quality without the sit-down formality. Then, when it comes to celebrating, they’re skipping the mid-tier entirely and going straight to high-end, spending £60 or more a head.”
Clearly the middle market is feeling the pinch as Richard Caring’s Ivy Collection business recently sent a letter to suppliers demanding a 2.5% discount in response to the current cost of trading. He’s since apologised for it but it shows even he’s not immune to the tough times – he’s currently looking to sell off a significant portion of his empire and is also rumoured to have walked away from the new Chancery Rosewood project.
It’s hard to stop the rot when everyone’s in the same boat and fighting for the attention of the same customer base. The sheer amount of press releases and activations that we’ve seen is indicative of how much people are trying to keep the lights on.
In an effort to encourage people to dine later, Jeremy King is offering 25% discount at Arlington and The Park after 9pm, and Kitty Fisher’s and Cora Pearl are offering free bottles of champagne for late tables. Tao Group Hospitality, which owns Hakkasan and Yauatcha, has dropped prices on several menu items (the £28 crispy duck salad at Yauatcha has been halved) to “try and cast a wider net”. Every restaurant worth its salt seems to be doing a set menu, and all-you-can-eat offers are back in vogue too.
Capturing the home market is proving to be another avenue of focus. We may not be at lockdown levels of saturation but meal kits definitely haven’t disappeared, and marketplaces like DELLI – which stocks products from bakeries, bars and restaurants like Caravel, Umbrella, The Good Egg, Koya, Tayer + Elementary, Vincenzo’s, Gymkhana and Sambal Shiok – offers businesses an additional revenue stream.
Others are choosing a complete change in model. More restaurants are doing deals to go inside hotels, which is less risky but doesn’t always feel like a natural fit, or they’re shifting into pop-ups and residencies, which is where David is now positioning Chick ‘n’ Sours. As well as being less risky and more agile, “they don’t need the same level of upfront investment or long-term commitment that a full-scale brick-and-mortar restaurant does, and that kind of flexibility is crucial when the landscape is shifting so fast.” Without the pressure of leases, fit outs and other fixed costs, more attention can be paid to the brand and the food, and you can better “create urgency — a sense that you’ve got to try something before it’s gone — and that really resonates with diners, especially in London, where people are always chasing the next thing.”
Higher-end business and Michelin-trained chefs are also making an effort to capture a different section of the market by opening more casual spin-off brands. Michelin-starred chef Tom Kemble, who’s worked in kitchens like Hedone, Faviken and The Pass, has just opened casual pizza restaurant Spring Street Pizza; two-star chef Jordan Bailey, formerly at Restaurant Sat Bains and Maaemo, is now doing smashburgers at Heard Burger in Borough; and Adam Byatt has set up a sandwich truck outside his Michelin-starred Clapham restaurant Trinity.
Will all those efforts be enough? We’ll have to wait and see.
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