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Tue 17th Nov 2020 - Opinion Special: A shot in the arm and another in the foot

A shot in the arm and another in the foot by Mark Wingett

Talk to any sports fan about their aspirations for their team at the start of a new season and without fail, the vast majority, against all previous historical data and their better judgment, will find a small argument to suggest that this time it will be different, this time we could win/get promoted/stay up. The cynic inside them, and this Plymouth Argyle fan, will quickly be reminded that it is “the hope that kills you”. The UK’s hospitality sector, indeed the nation as a whole, has spent the past eight months in a state of hope deprivation, living off scraps. Unsurprisingly, news this past week or so that positive progress has been made on vaccines for covid-19 injected a huge shot of hope through the sector. Shares in listed companies rocketed – from a low base, it has to be said – and while the sector got used to being under lockdown again, there was a sense of being able to look at 2021 in a brighter light. Days later, Whitbread rowed back on how many job cuts it had previously proposed to make, in a move that boosted hopes that the extension of the government’s furlough scheme and a breakthrough in the race to develop a covid-19 vaccine could soften the jobs crisis. As Young’s chief executive Patrick Dardis put it: “This is the first bit of good news since March. It is huge, a real game-changer and should give us all hope that the ‘old normal’ is not yet a lost cause.” It may also, for the immediate future, diffuse some of the revolutionary fervour that was building up across the sector over its ongoing treatment from the government. But for how long when trust between the two has fundamentally broken down and the latest press briefings give no indication yet of what sort of restrictions will have to deal with this time around?

The final panel session from the Propel Multi Club event earlier this month was indicative of the fractious mood currently coursing through the sector. Hospitality Union founder Jonathan Downey, who has lost his business during the past eight months, was unsurprisingly in full manning-the-barricades mode, despairing at the continued lack of proper, targeted support for the sector, and the needless job losses and business closures that have already happened. He was keen to take the gloves off and go on the attack. UKHospitality chief executive Kate Nicholls was, as you would imagine, more balanced, but it was telling that she touched on the fundamental breakdown of trust between the sector and government, which means operators no longer believe what they are being told. As Nicholls pointed out: “At the moment, you have a level of uncertainty that comes about from the government making fundamental decisions and then making U-turns – it has consequences – and, therefore, we don’t believe what we’re being told. That makes it very hard to plan and difficult to manage risk effectively. Something that should have ended uncertainty for a lot of workers in the industry hasn’t because we can’t plan with any certainty what our future is.” Chancellor Rishi Sunak has provided much-needed support for the sector but his extension of the furlough scheme to the end of March is, arguably, the first time he has got ahead of the virus. It should have been a good bit of news for the sector but, as Nicholls pointed out, “in a sense, the reaction shows you how demoralised and dis-spirited the industry is that it sees that as ‘we’re in closure for three months’ rather than ‘we are in restrictions’”. In a sector that offers many examples of fine leadership, the frustration that it is not seeing any from those in charge of the country nor any clear communication or strategy about how we pick a path through the crisis and beyond is bubbling over. Not one to hold back, serial sector investor Luke Johnson called on more to speak up from all sectors, he tweeted: “The timidity of the leadership across industry in challenging the totalitarian behaviour of our governments is shocking. So many cowards.”

Again, I imagine the furlough scheme extension led to another rush to the calculator and deep discussions with finance teams about how this would impact budget forecasts and the knock-on effect on their arrangements with lenders. Sunak has handed out many financial lifelines over the past eight months, but many of these come with strings attached – as in the Coronavirus Business Interruption Loan Scheme (CBILS), which needs to be repaid, and tax and VAT needs to be paid eventually – not that there will be much, if any, corporation tax paid as there will be no profits to tax this year. With the extension of the furlough scheme, came the very quiet scrapping of the Job Retention Bonus scheme, which was brought in to financially encourage companies to retain staff members who had been furloughed. As James Low, founder and chief executive of Deep Blue Restaurants, which owns Deep Blue and Harry Ramsden’s brands, put it: “Many businesses continued to employ staff and based financial projections to banks in order to qualify for debt through the government’s Coronavirus Business Interruption Loan Scheme based on the government’s commitment the Job Retention Bonus would be paid in February. On 5 November, when the same businesses were worrying about surviving another lockdown, the chancellor announced the Job Retention Bonus (JRS), possibly their only lifeline, would cease to exist.” One restaurant chief executive called the bonus “a promise we could plan around”. He said he had already spent some of the bonus on keeping as many staff in work as possible. Had he known the bonus would be postponed, it would have made financial sense to make more staff redundant in summer and give the rest full hours. He added: “Now I’m caught between making staff with no viable job redundant now, or contributing to their furlough costs until March.” Martin Wolstencroft, chief executive of Arc Inspirations, put it more succinctly: “Removing the promised JRS bonus is a disgrace. It breeds a lack of trust, leaving us in hospitality with a massive hole in our cash flow. They have been deceitful and very irresponsible with their promise to us as business operators. It needs rectifying before it’s too late... now.” And how supportive will lenders continue to be? I have already heard of two examples this month of banks that, up to this point, had been supportive, but are now running out of patience, calling in debts and placing businesses in accelerated sales processes.

Already the leaks to the national press have started about new tier restrictions and geographies that may come in at the start of December. Could the government possibly be looking to scrap tier one, when some parts of the country are still reporting few or no cases? You wouldn’t put it past them. Will the relief of opening up again, in whatever form that might be, help assuage some of the anger in the sector? Possibly, but the reams of data coming out showing that the government’s tier strategy was starting to work in part, has further heightened the mood of a sector being hung out to dry for little or no reason. As Loungers chairman Alex Reilley tweeted: “Disappointing to see that the medical/scientific community is already gearing up to demand more misery and distress is inflicted on hospitality. It must be really annoying for some that we can’t be blamed at the moment.” As one analyst said to me: “I can’t remember a point in history (in my lifetime at least) when the media and government were so statistically illiterate. No proper perspective, no analysis, just point-scoring. This very real problem is not about blame or faults, it’s about working out what to do, and this is where the government has fallen down badly since we came out of lockdown. Choosing the wrong people to mastermind the important stuff has been a disaster. For example – given her track record, Dido Harding should be nowhere near government.” As I have said before, the horse has bolted here. What happens at the start of December when the sector has to go back into the tiers it entered lockdown in? Will the data again be skewed to make sure there is compliance? How many companies will jump the fence? When 4 July was being mooted as the date for coming out of the previous lockdown, Peter Borg-Neal, founder of Oakman Inns, pre-empted the government and said he would reopen on that date and to hell with it. I imagine he would have a lot of company this time if restrictions were brought in disproportionate to what the data was showing, especially as many now take the data being shown to them as “pie in the sky” stuff.

Taking of pies, the latest pie chart from Public Health England, shows only 2% of traceable infections (outside of the home) are happening in hospitality venues. The days leading into this latest lockdown highlighted that many consumers have made up their own minds about how safe the sector is. Unlike in March, many flooded into restaurants and pubs during their final days of freedom, with operators talking of record Mondays, Tuesdays and Wednesdays. As The Alchemist chief executive Simon Potts tweeted: “Bitter-sweet Monday numbers; this is definitely not March, more like August. At least guests understand that hospitality is not the problem – we’ll be back and strongly. Now we need a mid/long-term strategy from the government for 2021 to 2022 to seriously support businesses and not just jobs.” It is thought the government will wait until nearer the end of this month to let on what coming out of this lockdown will look like, which isn’t nearly good enough. As Andy Hornby, chief executive of The Restaurant Group (TRG), pointed out to me last week: “Suppliers on the whole have been absolutely fantastic, the speed at which they have had to respond to us sizing up then down and up again. I think, for the industry, that will be the biggest challenge over the next two months because we just don’t know how much notice we are going to get to turn the lights back on properly in early December. Certainly, as we try as an industry to speak with one voice, that has been our biggest message to the government in the past week – please give us enough notice to know how we ramp back up. The amount of cost you take out is one thing, but being ready to get the sales back in the door the moment we are allowed to restart is key. We all forget now how gradually we all restarted back in July. We all took it very slowly, and that is why we got the ops right and were all in good shape to be ready for Eat Out To Help Out but, this time, we will have to be ready from day one. That is going to be the big difference this time.”

You know the sector, as always, will try to rise again to that challenge, with or without government assistance. Some have kept on staff to handle bookings in the run-up to the festive season, in the hope we will get one, while others have started their marketing campaigns – check out the very good one from The Alchemist. Anything to project some kind of normality/keep some momentum going. As Sacha Lord, night-time adviser for Greater Manchester and co-founder of Parklife and The Warehouse Project, said in a letter to health secretary Matt Hancock via his solicitor: “There is no more important period of time in the hospitality and leisure industry than December, and my client is anxious to play his part to ensure as many businesses as possible can survive into 2021. The return to a local tiered approach is broadly welcomed by our client, though in a modified form that he believes will support the suppression of the virus but also maintain jobs, businesses and social society.” Wednesday, 11 November should have seen a review of the 10pm curfew restrictions, but that didn’t take place after the new lockdown was brought in. No evidence has still yet to be found for why this measure was brought in and could, at least, provide one early Christmas present for the sector if it was ditched in time for the reopening of the industry in December. Judging by early reports in Wales, which came out of its own short lockdown this week, demand from people to eat out and drink out remains, with operators reporting “encouraging sales”.

Much has been made of how we are all in this together but the past few weeks has driven further holes into this argument. This lockdown feels different in a number of ways. Lessons have been learnt from the last one certainly as the levels of “at home” ranges testifies, plus lines of conversations with suppliers and landlords will already be open and, hopefully, more fluid. This one will be, as promised by the government, shorter. It also feels that the public is taking a more laissez faire attitude, helped by the reduction of restrictions compared with the first lockdown. However, this has underlined the feeling that the sector is being harshly treated/picked on/demonised. At the start of the month, an email arrived in my inbox from Majestic Wine, the UK’s largest specialist retailer of wine, with the chief executive saying the company would remain open because it was an “essential retailer”! This took the biscuit when, at that time, it was still unclear if pubs would be able to offer delivery/takeaway.

While all this is going on, more businesses and jobs are quietly falling through the gaps in the government support, worn down from eight months of closures, restrictions and costs. Faith in the government seems at an all-time low, and fears of the long-term impact of its strategy on the economic and mental health of the company at an all-time high. How will the government keep the public under restrictions as further progress on a vaccine or vaccines gathers momentum? And how on earth have no assessments on the long-term impact of lockdowns been carried out? It seems that, at least, there is movement in the Conservative Party itself to push for answers, with some backbenchers forming The Covid Recovery Group, which wants the government to undertake a cost-benefit analysis of restrictions. I wrote, earlier this summer, that the sector had bent over backwards to comply with everything the government has asked it to do – my fear it will be asked to make more concessions over the coming weeks to enable it to reopen next month. If that is the case, more will break under the strain. Others may simply rebel and say to hell with it, what else have we got to lose. Firstly, we need to know what the restrictions are, to know what the tiers are in advance of 2 December. What are the criteria and metrics to make sure you move up a tier or down a tier? Currently it’s opaque, and that makes it difficult to get business buy-in. A line has to be drawn somewhere. What if lockdown measures could end up being here for far longer than we expect?  Temporary has a way of becoming permanent. As JD Wetherspoon chairman Tim Martin pointed out last week, rules that forced pubs to close between 3pm and 6pm during World War I lasted until 1986. Hopefully, the government won’t make the same hash of this as their Northern Ireland counterparts. Already some scientists are correlating the jump in cases last week with people rushing out into hospitality in the days before this current lockdown, without, as yet, any data to back this up, but the fear is that it will seep into the government’s way of thinking. Talking about a lack of evidence, Sunak has already come under attack from those wishing to link the Eat Out To Help Out scheme with the second wave of infections. No wonder he rowed back quickly on a hint he might resurrect the scheme in January. I expect that many operators will bring back the scheme off their own backs anyway, and that may see some December trade pushed into what is traditionally the worst month of the year for the sector.

But then again logic seems to have left the building long ago. As Downey pointed out: “Having made the decision to lock down hospitality again without any evidence that infections are happening in our venues, how can they explain reopening our venues for an absolutely packed three weeks until Christmas? It doesn’t follow (if you follow their misguided thinking).” Talking to the BEIS Select Committee to discuss the impact of covid-19 on businesses and workers, Nicholls tweeted: “Key messages to MPs – we need early confirmation of reopening in December, advance notice of which parts of the country are in which tier, clear, transparent, evidence-based restrictions that are targeted and effective, stability not weekly changing, a clear end date. Best way to support hospitality is to get as much of the sector open as quickly as possible and with as few additional restrictions as possible (commensurate with public health), bearing in mind significant controls introduced in July that have kept teams and customers safe.” Sadly, it seems what we will get will be, as is now the norm, played out across the national media over the next fortnight. Fears have been raised that England could be headed for Christmas under a four-tier system after the latest lockdown ends – with the prospect of tougher limits on mixing indoors and alcohol sales. Housing Secretary Robert Jenrick delivered a strong hint that the levels of local restrictions will be bolstered even if the national curbs are lifted as scheduled on 2 December. He suggested some extra measures taken in Nottinghamshire – such as a ban on alcohol sales after 9pm – could be “embedded” in the arrangements. And he said no decision had been taken on whether to tighten restrictions on the lowest tier one. Jenrick also signalled regions, rather than individual towns and cities, will be subject to the same tiers, to make them more “consistent”. And he said there would not be any “definitive” decision on the shape of the rules post 2 December until the end of this month.

On the news on the progress of a vaccine, Professor Jonathan Van-Tam, the deputy chief medical officer for England, hailed it as “a very important scientific breakthrough”, but tried to play down obvious excitement around the news. One of his analogies was around a penalty shootout, saying it was as if a player had taken one penalty and scored, and that this was proof, merely, that the goalkeeper could be beaten. To take up his football theme, the manager of Plymouth Argyle (insert your own team here) was once asked to appear on the quiz show Win, Lose or Draw, to which he replied, it was nice to have an option for a change. The sector continues to have to live by the restrictions laid down by the government from data it no longer trusts – how long before it is put on the spot and forced to pick its own options? The news of possible vaccines and, at the moment, that is all it is, has given the country a shot in the arm. Let’s hope the government takes time out from generating more uncertainty, confusion and contradiction and, in the process, shooting the hospitality sector in the foot… again. Sadly, I won’t count on it.
Mark Wingett is Propel insights editor

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