Essential Business

One in four restaurants bankrupt

 In Catering and Hospitality, News, Tourism

By the end of 2021 one in four eateries in Portugal will be technically bankrupt according to estimates from the Bank of Portugal.

The BoP forecasts that 26% of companies in the restaurant and airbnb sectors will have negative own capital by the end of this year, with micro-companies faring the worst.
The central bank estimate also says that 16% of businesses in a sector highly dependent on tourism were already in the red by the end of 2020.
In its economy bulletin for May released on Wednesday, the central bank’s economists evaluated the impact of the pandemic on the capitalisation of Portuguese companies per sector, and forecast what they thought was the most likely outcome by the end of the year.
The main conclusion is that in the first year of the pandemic, the percentage of companies with negative own capital had increased from 4% in 2019 to 5% in 2020.
This is a restrained result given the “magnitude of the shocks” that affected companies in 2020,” the central bank admits, given that companies had changed their cost structures and drawn on emergency government financial aid and grace periods on loans.
For 2021, the simulation points to a percentage point increase of 6%. However, this estimate assumes a scenario where financial support measures are not given to companies, apart from the ones currently in force, let alone fresh capital injections into companies.
It is currently known, however, that the government is preparing instruments to recapitalise Portuguese companies but it is not know exactly how, under what criteria and when.
The central bank economists also admit that there are significant differences between sectors and companies of different sizes because of the differentiated impact of the pandemic crisis.
Despite this, and in the view of the Bank of Portugal, the impact of the pandemic was most pronounced in the sectors that revolved around tourism and these statistics show it in an unequivocal manner: “In terms of variation, in 2020 the increase in companies with a negative net liquid situation was particularly acute for the restaurant and bed and breakfast accommodation segments,” says the BoP, stating that the percentage went from 4%-16%. Four times in one year alone.
In 2021, the pattern will be repeated with an increase of 26%, 10 percentage points in one year alone.
Business owners in the Algarve have been particularly concerned and at the end of April were already fearing a weak summer given the restrictions in place at that time to contain the Covid-19 pandemic.


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