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Tue 17th Mar 2020 - Propel Opinion: The industry needs help and now

Government needs to support the sector by Mark Wingett

“This government seem to really hate the hospitality sector”. It’s hard to argue with this tweet from last night by Loungers chairman Alex Reilley. In just the past few weeks the government has done little to address sky-high business rates, introduced regressive and crippling immigration policies and now, as of yesterday, issued advice to the public to avoid hospitality businesses without any formal lines of support or a continuity plan. Like many of his peers across the sector, I imagine Reilley had spent the day and last few weeks working on worse case scenarios for a business he had worked hard to build. Trying to find the right plans to see a route through what was going to be an incredibly tough few month, whilst also assuring staff that somehow things could be worked out, they would be ok. He, like others, was probably hoping for some significant aid from the recent Budget. Instead the sector received one that “did not go nearly far enough” as UKHospitality put it. Today would have been a day when many sector bosses would have been having hard conversations with their teams, cutting back not only on hours, but sadly having to have many painful conversations regarding redundancies. After a tough day, they then receive a further body blow – the Prime Minister is advising people to avoid the very businesses they are manfully trying to keep operational. 

Not a full lockdown, but an almost cowardly suggestion. But wait surely it would come with the caveat of some new fiscal stimulus, a bailout of 2008 proportions to give the banks the ability to support those businesses, the majority of which he is invariably sending to the wall? But alas no. When asked on what support the hospitality sector would receive, Johnson invariably, as is his way, gave an answer without any detail or substance. Even with a full lockdown, businesses hoped they would be able to claim insurance, although I even understand that is a grey area, but this weak halfway house leaves the sector in limbo. Pubs, restaurants, bars, nightclubs and coffee shops aren’t being forced to close but are having their income taken away through government advice. The sentiment from operators immediately afterwards was, aside from anger and disbelief, to keep serving their guests and communities as much as possible – safely and responsibly – until they can’t cash wise or are told to do otherwise. As acclaimed US restaurateur Danny Meyer put it yesterday: “If ever there were a time for government to provide fiscal leadership for hospitality workers and the industry it’s NOW. Mandated closings wisely protect communities, but minus revenue, restaurants alone simply cannot fully care for our people and be able to reopen when this storm passes.”

Whole swathes of sector businesses face being wiped out, along with the hundreds of thousands of jobs they provide. Existential threat, catastrophe, call it what you like, the sector is fighting for its life, and the government up till now making sure they do it with one hand tied behind its back. Businesses are already taking things into their own hands, with the majority set to forfeit payments on rents, business rates and taxes to ensure they can pay staff and key suppliers. After that there aren’t many more levers to pull. As always, the sector has acted quickly to find ways to meet the challenges head on, cutting hours, offering vouchers, turning sites in to delivery-only/grab-and-go formats, and at the same time trying to help those that are vulnerable in their local communities. The ability of the UK hospitality sector to rise to any challenge should never be underestimated, but this one is greater than all the ones that have gone before and the sector itself can only have a chance of beating this one, if it gets the support it desperately needs and deserves. As The Breakfast Club chairman Charlie McVeigh put it: “Fortunately the hospitality industry is used to being the cash cow-cum-whipping boy of corporate Britain. But even lifers will be surprised by how blasé and punitive our treatment has been in this instance.”

A penny for the thoughts of UKHospitality chief executive Kate Nicholls this evening. She has fought the sector’s corner tirelessly over the past few years, but she must feel like she is banging her head against a brick wall, when it comes to figuring out which way this current government will jump. I have long been an advocate that this sector should talk to the government with one voice, and Nicholls has been, and remains, the best person to do that, but it’s surely time for others to put their heads above the parapet. There are plenty of brilliantly vocal, passionate and belligerent operators out there who have been trying to get the sector’s point across. The aforementioned McVeigh and London Union founder Jonathan Downey have been at the very front of the sector’s fight back, especially on Twitter. With the latter becoming an unofficial rallying point for the steps the industry needed to take, all up-to-date information and in shining a light on what is happening to hospitality sectors internationally. Serial sector investor Luke Johnson has, as ever, provided a number of succinct points, take this latest one: “I estimate cost of three-month wages (likely shutdown) for entire hospitality industry would be £5bn. If government underwrote it they’d preserve jobs, businesses and tax receipts. Compare that to £85bn+ for HS2. No contest.”

And just by looking around at other countries, our government should be able to see there are ways in which they can help. In France, the government there announced a huge package to support French businesses, guaranteeing bank loans up to $300bn; companies rent and utility bills suspended. President Macron said: “No company, of any size, will be allowed to go bankrupt.” Denmark’s government cut a deal with unions and companies that will see that state pay 75% of wages for private-sector employees whose jobs are at risk due to coronavirus. For three months, the Danish government has offered to pay three-quarters of employees’ salaries up to 23,000 Danish crowns (£2,800) per month, while companies pay the remaining 25%. Employees will give up five days of paid holiday or work five days for free under the plan.

No-one is denying that significant measures have to be taken to save lives from the coronavirus outbreak. Be these need to be clear, thought out, and with a view toward what the world might look like when normality returns. In Ireland 140,000 have so far lost their jobs due to the outbreak and measures taken by the Republic’s government, including a lockdown of pubs. 85% of those were in hospitality. Comparing population sizes that is 1.5m in the UK. The word coming out of the government overnight is that Chancellor Rishi Sunak will be at today’s No10 press conference to outline support package for businesses. It’s time for the government to step up and fast, with clear clarity of purpose. There needs to be a massive scheme to underwrite bank loans to businesses – and help them and their employees through this crisis. As Dan Hodges of the Mail on Sunday tweeted: “The last financial crisis destroyed the reputation of the banks. This crisis could restore it. If they do the right thing.” Time is running out. The government needs to make this count, let’s hope they don’t let us down again.

Mark Wingett is insights editor at Propel Info

BBPA – UK Pub Industry will be lost in days without immediate, decisive government action

The British Beer & Pub Association has written to the government warning that the pub sector will be lost without immediate government help. Chief executive Emma McClarkin stated: “The UK pub and brewing industry is tonight facing an existential crisis as a direct result of the guidance issued by the government today. Thousands of pubs and hundreds of thousands of jobs will be lost in the very short term unless a proactive package creating cash and liquidity is provided immediately to the industry. Today’s government guidance advising that people avoid pubs did not provide any form of advice or clarity on how the industry should respond. This is unhelpful in the extreme. At the same time the absence of any financial commitment to stand behind all businesses including small community pubs is creating panic with people being fearful that their livelihoods will be destroyed. We urgently require more clarity from the government. The government’s advice without the required clear directive impacts on both the safety of the general public and all employees. Forced pub closures without a meaningful support package will have a catastrophic financial and social impact. Pubs are the heart of the community and the social hub in all towns, villages and cities across the UK. The sector supports almost a million jobs across the country, many in less affluent areas. These jobs are in imminent danger, companies will be required to act this week regarding redundancies. The social and economic value that the sector provides to the UK is under existential threat. The announcements in the Budget last week are now irrelevant in the context of the challenges the industry faces tonight. In order that our sector can confront this devastating scenario, we would ask that the government takes the following actions immediately as a matter of urgency in order to prevent mass job losses and permanent pub closures:
 
• The cancellation of all business rates payments for a period of six months, as well as all HMRC tax payments, including PAYE, VAT and corporation tax for pubs/hospitality businesses
• Cancellation of beer duty payments for a period of six months
• Ensure banks are encouraged to extend credit lines and favourable-terms loan payment holidays to keep businesses afloat/pay wages
• Put in place a temporary redundancy scheme in which, as in the Danish system, the government commits to supporting 75% of the wages of those made redundant for a defined period
• In the medium term, explore the viability of a substantial VAT cut for a period of time in order to drive trade back to the hospitality sector
• Postponement of the planned National Minimum Wage/National Living Wage increase due in April in order to ease pressure on cash-flows
 
I cannot emphasise strongly enough how critical it is that action is taken now. Failure to do so will destroy the industry and measures taken to support these businesses should be seen as an investment in securing the future of urban and rural communities across the country as the British Pub remains at the heart of social cohesion.
 
The industry is already working closely with their own managed house teams and their tenants to provide additional support where possible but there is a limit to what they can do, and they do not have the resources that will be required. Hence the urgent need for all of the support that is outlined above to be provided now.
 
It is critically important that the industry is now closely consulted on any further decisions taken that impact pubs.”

City Pub Company outlines its Coronavirus action

City Pub Company has issued a statement outlining its Coronavirus actions. It stated: “For the first 11 weeks to 15 March 2020, total turnover is up 11% against the same period last year. Like-for-like sales for the same period were down 4.5%. Recent trading has been impacted by COVID-19 and its wider effects, particularly on sport, and certain sites have witnessed noticeable reductions in trade as a result. However, other of our more prominent local community pubs have been more resilient. It is difficult to accurately assess the extent to which COVID-19 could impact our trading and financial performance at this time, however we expect a material reduction to our expectations for 2020. In order to ensure the company emerges out of the COVID-19 crisis in stronger yet leaner shape, management is taking a highly prudent approach with a number of proactive measures to reduce costs and preserve cash, including: reduction in employee costs across head office and at site level; reduction in other variable costs e.g. Sky/BT Sport, entertainment, where applicable; reductions in director salaries of 25%; and reviewing trading hours to reduce non-productive opening times. Based on the above actions, the board is confident the company has sufficient working capital to maintain its operations for at least another six months without further capital, even in the event the government extends its current guidance and mandates a temporary closure of all pubs and bars. The company is also entering into negotiations with its landlords to seek rent holidays for the next three to six months. The company’s bankers, Barclays, remain supportive. The company’s balance sheet is strong with current net debt of £32 million against a portfolio consisting predominantly of freehold assets with a net book value of £116 million as at 29 December 2019.”

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