By James Arnold BBC News Online business reporter

"London's myriad restaurants," gushes listings magazine Time Out, "are not only a reflection of the cosmopolitan nature of the city but, more significantly, of its population's continually evolving interest in cuisines of all types and nationalities."

Any wobble in the top line produces a severe squeeze in profits

Bob Cotton, British Hospitality Association

During the 1990s, culinary London abandoned its British reserve, exploding in a cornucopia of quesadilla, falafel, teppanyaki, goulash and goodness knows what else.

But while diners are smiling, the financiers behind London's restaurant boom have developed a nasty case of indigestion.

For at least a year, the capital has been gripped by the worst restaurant slump for a decade, and things may get worse before they get better.

Selling up

In recent weeks, the slump has started to convulse the broad - and for a while, seemingly invulnerable - middle market.

On 1 October, Luke Johnson announced a buy-out offer for Signature Restaurants, of which he is chairman.

The Tuesday evening rush

A week earlier, the firm - whose portfolio runs from beer-and-mussels chain Belgo to the upmarket Ivy and Le Caprice - had announced the closure of half-a-dozen outlets, and said it was for sale, declaring that it saw no end to the restaurant recession.

At the same time, steak-frites chain Chez Gerard also put up the for-sale sign, and stepped up the pace of closures.

A year ago, the firm said it would have 40 outlets by June 2002.

Now, it has just 24.

The two group's travails mirror a constant rumble of bad news over the summer, including the failure of Fish, a swanky seafood chain, and stagnating sales at Pizza Express, the firm that barely put a foot wrong for 30 years.

Eating's out

So far, restaurant executives have tended to pin the blame on foot-and-mouth or September 11.

If only it were that simple.

Certainly, the froth on the London restaurant scene - free-spending tourists and flash City workers - has been blown off by September 11 and the global economic slowdown.

But the industry's core domestic market has also ground to a halt.

Britons spent �20.8bn on eating out in 2001, according to the British Hospitality Association (BHA), the same amount as in 1997-98, now seen as the peak of the market.

Price problems

Stagnant sales would be far less of a problem if costs had not shot through the roof.

You can't get the staff these days

Nick MacKintosh, a former restaurateur, says he used to spend some �25,000 a year renting a site in Chiswick - a smart London suburb - in the 1990s.

Now, he says, Chiswick rents have risen to �80,000 or more.

And wages, once a negligible item, now account for up to one-third of a London restaurant's costs.

The combination of minimum-wage legislation and central London's near-zero unemployment level has driven catering wages up by more than 10% this year alone.

With these costs "any wobble in the top line produces a severe squeeze in profits", says Bob Cotton, BHA chief executive.

Growing pains

Not that restaurateurs are entirely blameless.

It would be impossible to get a table at the Ivy, recession or no recession

Peter Harden, Harden's guides

The optimism of the 1990s encouraged headlong expansion - London's restaurant population grew by 30% in a decade, some observers say.

Chez Gerard leapt from running half-a-dozen outlets at the start of the 1990s to a peak of 31 this year.

Belgo went almost berserk with optimism, opening branches as far afield as Jersey, Dublin and New York.

"The chains expanded far too exuberantly during the good years," says Peter Harden, founder of the Harden's restaurant guide series.

"And now they are suffering for it."

A nicer class of problem

At the Michelin-starred end of the market, the economics are less clear cut.

The waiting list for dinner at posh joints such as Gordon Ramsay, Nobu and the Ivy is still a month or more.

The celebrities and international jet-setters on which - according to legend - these establishments rely are seen as largely immune to the vagaries of the global economy.

"It would be impossible to get a table at the Ivy, recession or no recession," Mr Harden says.

But behind the fixed smiles, observers reckon the pain has reached such top outlets too.

Their cost bases is massively higher than the industry average, and tourism statistics hint that individual spending levels have fallen faster than customer numbers.

On the bright side...

The beneficiary of all this, of course, is the consumer.

Once-haughty restaurants are getting friendlier - Le Caprice may still turn you away, but with charm and tact.

The recession-proof end of the market

While the big, homogeneous chains are suffering, says Nick MacKintosh, "small, cosy neighbourhood restaurants are on their way back".

And there is a greater emphasis on value. Even the swankiest eateries offer �10-20 set lunches, and bargain hunters are bombarded with newspaper meal-deal vouchers and other freebies.

For the restaurateurs, meanwhile, humble pie seems to be the dish of the day.

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How long do you have to wait to get a square meal?

In a wholly unscientific attempt to take the temperature of the market, BBC News Online rang around six of the capital's swankiest restaurants.

Your correspondent asked whether a table for two would be available for dinner on Tuesday evening and, if rebuffed, enquired about subsequent nights.

Here are the results:

• At Gordon Ramsay, arguably the capital's best-regarded restaurant, there was no chance. "Book at least a month in advance," we were told.

  Don't even think about it

• At Nobu, there was the same result, except that our correspondent was put on hold for four minutes first as "all our operators are busy".
• A kinder rebuff from Le Caprice, with the vague advice to "book as far ahead as possible".
• Three minutes of hanging on the telephone to Tante Claire, maybe London's top pure French restaurant, brought a surprising result. Your correspondent was easily accommodated that night, without even having to specify a time.
• Another unhesitating "yes" from Le Gavroche.
• At the Ivy, a restaurant celebrated more for its A-list clientele than its A-list food, the phone was permanently engaged.

None of this is necessarily significant.

Top restaurants use smoke and mirrors to maintain their reputations for exclusivity, sometimes even turning bookings away when tables lie empty.

As one restaurant critic says: "They think if you thought you could get in easily, you wouldn't want to - if you see what I mean."