Restaurants face record bankruptcies in Finland amid ongoing economic struggles

Antti Aro started his restaurant business at the worst possible time. In 2019, he and two colleagues bought a restaurant in Tampere specializing in Nordic food and drinks, just before the onset of the pandemic. This spring, they filed for bankruptcy for Gastropub Nordic. Aro was forced to sell his apartment, which was collateral for the restaurant’s debts. “It was tough, but at the same time very liberating to submit the bankruptcy application,” he said.

Aro’s experiences reflect a broader trend. Last year saw more restaurants go bankrupt than in the previous two decades, and the pace has intensified this year. According to Timo Lappi, CEO of the Finnish Hospitality Association (Mara), the financial struggles during the crisis have become so severe for many entrepreneurs that they have reached a breaking point. He describes the cost situation for restaurants post-COVID as unbearable, stating that establishments that otherwise would not have closed have succumbed under heavy debt burdens.

By the end of August, nearly seven percent more restaurant businesses filed for bankruptcy compared to the same time last year, indicating a potential record number of closures. However, there is a significant gap in the statistics, as many restaurants cease operations without officially declaring bankruptcy. This year, the number of restaurants shutting down is up 81 percent compared to last year.

Lappi believes the main cause of this crisis is the nearly two-year-long pandemic restrictions, which disproportionately affected businesses that were launched during or just before the COVID era. For Aro, his restaurant’s turnover dropped by over half during the pandemic years. Unable to recover before inflation surged, he faced persistent losses leading to bankruptcy as the only option.

The economic downturn has also affected restaurant customers. Jaakko Nors warns that decreased consumer purchasing power is a significant threat to the industry, especially with rising VAT and taxes impacting prices and potentially reducing demand further. The recovery of the restaurant sector will depend largely on the swift restoration of consumer confidence and purchasing power.