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Surge in business rates pushes Jamie Oliver's Barbecoa chain closer to the edge

Sophie Christie
Jamie Oliver's restaurants faced a 28pc jump in business rates over the past year, Colliers says - PA Archive

Jamie Oliver’s restaurants have faced a 28pc rise in business rates this year, as the celebrity chef’s Barbecoa chain looks set to cease trading this week.

The total bill for restaurants across Mr Oliver’s empire rose to from £5.7m to £7.3m in the last year, with one the bill for one restaurant in Brighton jumping by a whopping 154pc, according to analysis by property firm Colliers.

The news comes after The Telegraph revealed that Mr Oliver’s two Barbecoa restaurants had been hit by rising costs, leaving bosses unable to meet rent bills.

John Webber, of Colliers, said casual dining chains were being squeezed after the revaluation of rates bills in April 2017.

“Many companies are now asking their landlords for a reduction in rent as the physical costs of running a property become an increasing burden,” he said. “Business rates are playing their part in the difficulties as some of the massive rises for particular restaurants show, particularly those in London.”

Mr Oliver has been forced to close 13 Jamie's Italian restaurants Credit: Chris J Ratcliffe

Mr Oliver has already closed 13 of his Jamie’s Italian restaurants as part of a company voluntary agreement (CVA). He had been set to open a third Barbecoa site in a new development in London’s Victoria, but it is yet to begin trading, leading to speculation that the company has pulled out of the site.

Meanwhile, other chains are also facing large jumps in their business rates bills. Colliers’ research showed Prezzo’s rates grew 23pc to £15.9m last year, while burger chain Byron was hit by a 40pc rise to an annual cost of £10.6m.

Accountancy firm Moore Stephens found that the number of insolvencies of restaurant businesses jumped 20pc to 984 in September, up from 825 the previous year.

The sector has been hampered by increased competition on the high street due to an "unprecedented level of rollouts of new restaurant chains" over the past 10 years, as well as rising wage costs, brought about by the introduction of a higher minimum wage, which rose from £7.20 to £7.50 last year and is set to rise in April to £7.83 for those aged 25 and over. The Government's apprenticeship levy has also weighed on companies.

The rising cost of imported produce, caused by the pound's fall in value, has also hit the profitability of restaurants – as have business rate rises introduced in April 2017. Add in competition from online takeaway services and there is further pressure on bricks and mortar businesses.

Jamie Oliver: career highlights

One of Britain’s biggest sandwich chains, EAT, announced earlier this month that it had hired KPMG to help it assess options after beginning to struggle under the weight of rising business rates and wage costs.

One option for the chain could be a company voluntary agreement, or CVA, whereby creditors agree to take a cut on what they are owed, sites could be closed, or another investor could be brought in to inject more cash into the company.

Casual dining isn't the only victim of increasing cost pressures in the sector. Last week French chef Raymond Blanc’s restaurant venture Brasserie Bar bemoaned a business rate hike for adding to an “increasingly hostile” trading environment as it posted a near £3.2m pre-tax loss. 

A 12pc spike in its business rates bill alongside higher debt payments pushed it further into the red. 

Jeremy Willmont, of Moore Stephens, said: “Pressure on the restaurant sector is now hitting even the biggest names on the high street."

He warned that under such tough trading conditions, restaurants should be cautious about taking on too much debt. "They can very quickly become over-extended as costs continue to rise,” he said.

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