Credit squeeze imperils small contract caterers

A number of contract caterers could "hit the wall" this year as margins are squeezed ever tighter, experts have warned.

The business and industry (B&I) sector of the market is predicted to shrink this year, a drop that has been exacerbated by collapses such as Woolworths - which employed 30,000 people - and falling numbers of staff in financial services.

Fewer contracts to win, allied with rising overheads, means this could be a difficult year for a number of B&I caterers, according to Tim Cookson, chairman at food service consultancy Litmus Partnership.

"It's particularly tough for the smaller players, with turnover up to £12m to £15m a year," Cookson said. "These firms rely on winning new business. But at the moment they are not, yet overheads remain the same."

Graham Sims, managing director of Compass Group's Eurest Services division, agreed and added that he expected to see restructuring in the contract catering sector over the next year.

"Several caterers have won business recently where they have gone in with such low margins on the assumption of growth balancing the books that they are going to hit the wall," he told Caterer.

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By Chris Druce

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