Pizza Hut’s biggest UK restaurant franchisee is closing in on a rescue deal that would salvage the vast majority of its British outlets and jobs.

Sky News has learnt that Directional Capital, an investment firm which already controls much of Pizza Hut’s dine-in operations in Denmark and Sweden, is in advanced talks to acquire roughly 140 sites in the UK.

A deal, which could come as early as Wednesday, would be structured as an acquisition of Heart With Smart (HWS), the main franchise-holder, by Directional Capital.

Financiers said there was a strong possibility the transaction would be implemented through a pre-pack administration of HWS.

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They added, however, that an insolvency of the corporate entity would not lead to substantial numbers of site closures or job losses.

Only a handful or so of the chain’s existing outlets – at most – were at risk of being axed, they said.

HWS, which was previously called Pizza Hut Restaurants, employs about 3,000 people, making it one of the most significant operators in Britain’s casual dining industry.

If completed, a deal would bring a successful end to a sale process which has been running since the aftermath of Rachel Reeves’s budget in late October.

Insiders told Sky News in November that increases to employers’ national insurance contributions (NICs) which come into effect in April would add approximately £4m to HWS’s annual cost-base – equivalent to more than half of last year’s earnings before interest, tax, depreciation and amortisation.

HWS is owned by a combination of Pricoa, a lender, and the company’s management, led by chief executive Jens Hofma.

They led a management buyout reportedly worth £100m in 2018, with the business having previously owned by Rutland Partners, a private equity firm.

HWS licenses the Pizza Hut name from Yum! Brands, the American food giant which also owns KFC.

Interpath Advisory has been overseeing the sale process.

Even before the budget, restaurant operators were feeling significant pressure, with TGI Fridays collapsing into administration before being sold to a consortium of Breal Capital and Calveton.

Sky News also revealed during the autumn that Pizza Express had hired investment bankers to advise on a debt refinancing.

HWS operates all of Pizza Hut’s dine-in restaurants in Britain, but has no involvement with its large number of delivery outlets, which are run by individual franchisees.

Directional Capital, however, is understood to own two of Pizza Hut’s UK delivery franchisees.

Accounts filed at Companies House for HWS4 for the period from December 5, 2022 to December 3, 2023 show that it completed a restructuring of its debt under which its lenders agreed to suspend repayments of some of its borrowings until November next year.

The terms of the same facilities were also extended to September 2027, while it also signed a new ten-year Pizza Hut franchise agreement with Yum Brands which expires in 2032.

“Whilst market conditions have improved noticeably since 2022, consumers remain challenged by higher-than-average levels of inflation, high mortgage costs and slow growth in the economy,” the accounts said.

It added: “The costs of business remain challenging.”

Pizza Hut opened its first UK restaurant in the early 1970s and expanded rapidly over the following 15 years.

In 2020, the company announced that it was closing dozens of restaurants, with the loss of hundreds of jobs, through a company voluntary arrangement (CVA).

At that time, it operated more than 240 sites across the UK.

HWS and Interpath declined to comment on Monday evening, while Directional Capital could not be reached for comment.

The government will “mainline AI into the veins” of the UK, with plans being unveiled today by Sir Keir Starmer.

The prime minister is set to promise investment, jobs and economic growth due to a boom in the sector.

It comes as his government battles against allegations they are mismanaging the economy and stymied growth with the budget last autumn.

The government’s announcement claims that, if AI is “fully embraced”, it could bring £47bn to the economy every year.

And it says that £14bn is set to be invested by the private sector, bringing around 13,000 jobs.

The majority of those would be construction roles to build new data centres and other infrastructure, with a smaller number of technical jobs once the work is finished.

Sir Keir said: “Artificial Intelligence will drive incredible change in our country. From teachers personalising lessons, to supporting small businesses with their record-keeping, to speeding up planning applications, it has the potential to transform the lives of working people.

“But the AI industry needs a government that is on their side, one that won’t sit back and let opportunities slip through its fingers. And in a world of fierce competition, we cannot stand by. We must move fast and take action to win the global race.”

The prime minister added that he wants Britain to be “the world leader” in AI.

The government announcement said: “Today’s plan mainlines AI into the veins of this enterprising nation.”

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To achieve this, the government will implement all 50 recommendations made by Matt Clifford following his review last year.

This includes creating new AI “growth zones” – the first of which is set to be in Culham, Oxfordshire, where the UK’s Atomic Energy Authority is based.

These zones will get faster planning decisions and extra power infrastructure.

The government also wants to increase UK computing power 20-fold by 2030, including by building a brand-new supercomputer.

Labour cancelled a planned supercomputer when it entered office, as it claimed it wasn’t funded. The new venture is expected to be a joint public-private project.

The government says its plans will have three pillars. This includes laying the foundations with new AI growth zones and the new supercomputer.

The second is to boost AI take up by the public and private sectors. New pilots for AI in the public service are set to be announced, and Sir Keir has written to all cabinet ministers, telling them to drive AI adoption and growth.

And the third pillar is keeping ahead of the pack, with the government set to establish a “team” to keep the UK “at the forefront of emerging technology”.

The announcement was welcomed by a slew of technology bosses.

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Chris Lehane, the chief global affairs officer at OpenAI, which released ChatGPT, said: “The government’s AI action plan – led by the prime minister and [Science] Secretary Peter Kyle – recognises where AI development is headed and sets the UK on the right path to benefit from its growth.

“The UK has an enormous national resource in the talent of its people, institutions and businesses which together, can leverage AI to advance the country’s national interest.”

The shadow secretary for science, innovation and technology, Alan Mak, said: “Labour’s plan will not support the UK to become a tech and science superpower. They’re delivering analogue government in a digital age.

“Shaping a successful AI future requires investment, but in the six months leading up to this plan, Labour cut £1.3bn in funding for Britain’s first next-generation supercomputer and AI research whilst imposing a national insurance jobs tax that will cost business in the digital sector £1.66bn.

“AI does have the potential to transform public services, but Labour’s economic mismanagement and uninspiring plan will mean Britain is left behind.”

The health secretary has said that the cabinet is aware of the “pressure” on Chancellor Rachel Reeves amid volatile markets and a challenging broader economic picture – but appealed for the public to “give her time”.

Wes Streeting argued that the public “underestimates” the “amount of heavy-lifting” Ms Reeves has had to do and will have to continue to do, as he declared “total confidence” in her leadership in a staunch defence of her handling of the economy.

Separately, international development minister Anneliese Dodds, who attends cabinet, told Sky News that Ms Reeves has been “very clear about the long-term plan for our country” and she herself is “confident in that long-term plan”.

The comments from the two key ministers come after the past week saw a drop in the pound and an increase in government borrowing costs, which has fuelled speculation of more spending cuts or tax rises.

Streeting has ‘total confidence in chancellor’s leadership’

Speaking at the Jewish Labour Movement’s annual conference in north London, the health secretary acknowledged the fierce competition among all government departments for any available public funding from the Treasury, and told party members that all ministers “have to make choices and trade-offs” in where funding goes.

Mr Streeting went on to say that the chancellor and her deputy, Darren Jones, have “the hardest job of all because they have to make those choices across every bit of government spending, and they have to think about what’s in the interests of our overall economy and how we get businesses growing”.

He said: “I think people continue to underestimate both the amount of heavy lifting she has had to do in her first six months, and the amount of heavy lifting she will have to do in her next six months.

“And the cabinet doesn’t underestimate that – we understand the choices she has to make, the pressure she is under.”

As a result, cabinet ministers all “have a responsibility” to both “make tough choices and drive reform and value for money” within their departments, and also be “drivers of economic growth”.

“Nothing in the last six months has shaken my conviction that economic growth is the number one priority,” he said.

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Continuing his defence of the chancellor’s handling of the economy so far, Mr Streeting said she is “trying to break us out of what has been the status quo and the economic orthodoxy of more than a decade”.

“People need to give her time, and they need to not forget that, without [Sir Keir Starmer’s] leadership, certainly we wouldn’t have won the last general election.

“Without Rachel’s leadership, we wouldn’t have won the last general election either. She built Labour’s economic credibility out of the ashes they were left in after the Corbyn leadership. And she has built that trust, built up that plan, and now she’s following through.”

He declared that he has “total confidence in the leadership that Rachel’s providing, and the leadership that the cabinet is following and driving with her, because all of us have to deliver economic growth for our country”.

Minister ‘confident in chancellor’s long-term plan’

Speaking in a separate session at the conference, Ms Dodds noted “speculation” about the fiscal headroom (the amount of money the chancellor will have available to spend), but said: “We have to focus on actually the evidence.

“And when we look at the evidence, we can see that the UK government has a chancellor who is very clear about the long-term plan for our country. She’s been delivering on it.”

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Ms Dodds, who also attends cabinet, pointed to a “new fiscal system”, the chancellor’s new Industrial Strategy Council, as well as “record levels of investment under Rachel Reeves’s leadership”.

“I think it’s really important for us to focus on those fundamentals, on what has been achieved in a very short space of time. And I’m confident in that long-term plan that Rachel has been setting out.

“And we can already see the benefit of that, frankly, in terms of the UK’s reputation when it comes to public finances, but economic management more generally. Certainly that’s what I’ve heard internationally and keep hearing just now.”

Chancellor accused of having ‘fled to China’

The pair were speaking as the chancellor holds meetings in China in a bid to drum up investment for the UK economy, having ignored calls to cancel the long-planned trip because of economic turmoil at home.

Opposition parties have accused the chancellor of having “fled to China” rather than explain how she will fix the UK’s flatlining economy, and former prime minister Boris Johnson said Ms Reeves had “been rumbled” and said she should “make her way to HR and collect her P45 – or stay in China”.

Speaking during her trip, Ms Reeves said she would not alter her economic plans, with the October budget designed to return the UK to economic stability, and reiterated that “growth is the number one mission of this government”.

She said that “action” will be taken to meet the fiscal rules. That action is reported to include deeper spending cuts than the 5% efficiency savings already expected to be announced later this year, while cuts to the welfare bill are also said to be under consideration.