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Sun 1st Nov 2020 - Opinion Special: A devastating economic hit

A devastating economic hit by Mark Wingett 

“Apologies to the 30 odd new people we were due to start employing next week at our new restaurant. You’ve just been screwed over by a bad PowerPoint presentation, lousy data and a hopeless strategy”, so tweeted serial sector investor Hugh Osmond, when the prime minister finally ordained with his presence to confirm, what we sadly know from the latest government leaks, that the country will enter a second lockdown from Wednesday at midnight. As Elite Bistros Gary Usher put it: “I’m absolutely broken by all of this. I’ve arranged a zoom meeting at 6pm following the briefing to discuss closing all six restaurants. It’s a heart breaking, life changing situation and the government don’t even have the grace & good manners to be on time for it.” Playing with people’s lives and livelihoods. We are told that we are locking down in November to save December and Christmas, but as Loungers chairman succinctly put it: “Christmas doesn’t need ‘saving’ it’s businesses, livelihoods, and jobs that need to be saved.”

How apt that the government was “forced” to go earlier on its lockdown announcement, on the “scariest” day of the year. Again, the sector was given limited communication, consultation or time to respond, or plan around decisions that will impact not just the next month, but the industry for years to come. As UKHospitality pointed out, the costs to hospitality businesses of a second lockdown will be even heavier than the first, “coming after periods of forced closure, the accumulation of mass debt and then significantly lower trading due to the restrictions of recent weeks”. Companies have been hanging on by their finger tips for weeks and months, this latest lockdown is absolutely devastating for everyone who has worked so hard to remain open. For many it will sadly be the straw that breaks the camel’s back, as British Beer and Pub Association warned, this lockdown will result in thousands of pubs and many of the breweries that support them being lost, unless the government urgently provides the sector the same, if not greater, levels of support than it did for the first lockdown. Halloween, usually a big night for the late-night sector in the traditionally more challenging months of October and November, has in fact pushed it further toward what Michael Kill, chief executive of the Night Time Industries Association, called a “Financial Armageddon”. In an effort to ensure its survival, the UK’s largest nightclub operator Deltic Group has already cut 1,000 staff – about half its headcount – and has repurposed parts of its clubs as bars, allowing it to reopen 10% of total floor space. But chief executive Peter Marks said this was bringing in £80,000 a month, compared with the £1m that the company is burning through, leaving it facing running out of cash by December. It sadly isn’t alone.

Has the government taken into consideration the stock wasted, the emotional drain of redundancy conversations that had already taken place as the initial furlough scheme deadline arrived, the thousands of jobs already lost, the further difficult talks now needed with suppliers and landlords, the wider cost of the lockdown on the sector’s ecosystem – suppliers being top of that list, and the mammoth task for operators of staying positive for their own sanity and that of your staff? As Luke Johnson pointed out: “This lockdown will be worse than last time: 1: It will be dark, cold and wet not sunny and warm; 2: Many more of us now know government and advisors haven’t a clue; 3: 80% furlough gone; 4: Mental health toll much more severe. All so futile.” Thankfully, the chancellor Rishi Sunak quickly made sure the third point here became a mute one. For once rather than wait days for an announcement on follow up support, an extension of the original furlough scheme, with again an 80% contribution from the government was announced parallel with Boris Johnson’s press conference. This is at least some reassurance over the coming four weeks, but how many after months of surviving on ever-decreasing sales can still contribute to make up the rest of the pay? As UKHospitality chief executive Kate Nicholls said: “Job support is good but we now also need urgent business support to ensure they remain viable and jobs are protected for longer term.”

A substantial support package for the sector now needs to follow, and quickly. Sadly, it seems that trust in the government to do the right thing by the sector is eroding by the day. As Hospitality Union’s Jonathan Downey pointed out: “Winter Economy Plan Four (director: Rishi Sunak) needs to be a lot better than WEP, WEP Two and WEP Three. Because Lockdown Two (directors: Johnson, Hancock, Whitty and Vallance) is going to be a lot worse than Lockdown.” And what about those operators who have been working under the stricter Tier restrictions for months – including those in Bolton, Leicester, Liverpool and Manchester, will quite rightly be asking where was this level support when they asked. If the government is set on “levelling up” then perhaps it will finally turn its attention to adequately taxing those who will benefit from this latest lockdown. As Brasserie Bar Co managing director Richard Ferrier points out: “If closing non-essential retail doesn’t lead to a ‘digital tax’ for the likes of Amazon, then nothing will. Simply not a level playing field anymore. High streets are the lifeblood of communities.” Whilst Scotland and Wales have given a definitive date for when their own lockdowns will end, those operators based in England will be fearful that their own purgatory could last longer, if the comments this morning of cabinet minister Michael Gove are anything to go by. Gove intimated that the month-long lockdown could be extended beyond 2 December if necessary. Nicholls said: “Leaders in the other devolved nations have been clear and confirmed to their citizens that lockdown has a finite end point and restrictions then lift. We need the same in England – the help on offer is simply inadequate for a longer uncertain future.”

The sector can’t continue living hand to mouth, with two hands tied behind its back. News last night that alcohol takeaway is not included in the revenue avenue’s operators could fall back on over the coming weeks, is at odds with what was allowed in the original lockdown, and needs to be changed, before again the sector loses sales to the untouched supermarkets. Also is there a single person watching that believes everything will be fixed by 2 December? After 2 December, the exit strategy is that different parts of the country will then return to the Tier restrictions, depending on how serious the virus is in these respective places. Hospitality, after getting over the initial shock of this second lockdown, needs to focus on what happens then, what further support it can secure, what trade it can, and is allowed to salvage in the run up to Christmas and whatever that looks like. It is not like we have a traditionally strong trading quarter to look forward to. As Nicholls points out it, there is “critical importance of a clear exit strategy to remove restrictions and the central role our viable sector will make in our nation’s economic recovery, if given comprehensive business support, and a clear roadmap out of lockdown”.

Sadly, trust in the fact that the government is doing the right thing, or will do the right thing, is eroding by the minute. Does anyone have faith anymore that the government will be able to use the next month, to get its lamentable attempts at a Test and Trace programme back on track? The anger and frustration that has been building up across the sector, has again intensified. One operator messaged me this morning to say he wanted to protest and asked if there were “any protests you’re aware off?” In his brilliant Sunday Times column today, Oliver Shah says the absence of dissent from big business — “maybe cowed by its defeat over Brexit or anxious not to cut across Sage’s advice — has been disappointing”. He namechecks laudable exceptions: including Richard Caring, Luke Johnson and Hugh Osmond, and adds “yet most public company bosses have chosen to keep their heads down rather than engage in public debate. Perhaps the job cuts do the talking for them”. Sadly, the noise generated by redundancies and business failure will build into a crescendo over the coming weeks without significant support, perhaps that will get more in the government and the wider public to change their position. Last month, a YouGov poll revealed that 67% of people would support a short “circuit breaker” lockdown in England. However, last week, a study of 2,000 adults by the Recovery Group, found that almost three in four people were more concerned about the impact of lockdown restrictions than catching coronavirus, with young people far more concerned about the mental health impact of any lockdown – and whether they will lose their job. As we know this government likes a poll.

Are there any positives? Well after the division of and operational challenges of working in and across the different Tier systems, the sector is again all in one bucket – for good or bad. Companies will have also learnt from and adapted during the original lockdown and should be bettered prepared to get through this one, whether that be through delivery, offering essential groceries, or ramping up “At Home” ranges. It is nowhere near like normal operations, but it could be the difference in bridging this latest sales gap. As I have written before, it may also allow some to recharge batteries for further challenges ahead. The sector should not, and I sure will not go quiet over the coming weeks, we need to continue to ask for extra support but also continue to call for the 10pm curfew restriction to be cancelled and not return in December. There is also the rent issue, and as I have suggested previously perhaps now would be a good time to say that the eviction moratorium will be extended until next March, rather than wait until we are in deepest December. It would be one less thing to immediately worry about for operators.

As Shah points out: “We cannot afford to wait for a mass vaccine, which could be months, if not years, away. We need to find a way of living through a better combination of testing, tracing, social distancing and shielding the most vulnerable.” Sadly, there will be an economic hit that will make people poorer and affect long-term mental and physical health. For the immediate future, today and the next few days, may have a “last days of Rome” feeling, as people go out for the last time before the next lockdown starts. I hope everyone goes out and supports a sector that has bent over backwards to comply with everything thrown at it and proved time and time again how safe and secure it is. As Reilley put it: “Hospitality may not save lives but in so many ways it is life – friends, family, love, community.” Hospitality is special, for 27 days, this country will be bleaker without it.
Mark Wingett is Propel insights editor

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