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Tue 23rd Feb 2021 - Opinion Special: When the levee breaks

When the levee breaks by Mark Wingett

So, act one of the two-act play that will determine the shape and size of the UK’s hospitality sector for years to come is over. The prime minister dutifully read out his lines, all of which we had heard during the previous 48 hours – amazing how those leaks always seem to be bang on the money – and now we have an intolerably long intermission before his chancellor takes the stage to show us whether this is a horror show, a comedy of errors or produces a twist that ends in a happier ending that, right now, many of us are finding it hard to picture. We have dates, and we have data, but only data that works to the government’s narrative – where is the data to say it is safer to open non-essential retail before indoor hospitality? We have a sector living on what little wits it has left, clinging again to the belief Rishi Sunak can pull a rabbit out of hat and conjure a support package that does more than place another sticking plaster on an open wound. As UKHospitality points out, the chancellor has “nine days to save thousands of businesses and hundreds of thousands of jobs that simply will not be there without a substantial package of compensation”. The mental torture continues. After a year of being put under mental strain, the sector is fraught, in danger of fracturing and falling off that long-feared cliff edge, where is the psychological support to get through the next three months and beyond? Johnson’s roadmap has the end of “legal limits on social contact” on 21 June. Can you imagine being told at the beginning of the first lockdown that we would be living with some form of restrictions for 455 days? How many who have held on this long have now already decided to throw in the towel? But, and it is a big but, we do have a roadmap out if this at last and we do have dates to aim for (dates not data!). Booking lines can be reopened, forecasts can be worked in with a bit more certainty, it may be small crumbs of comfort for some, but it is up to Rishi not to extinguish the hope many can get through till then.

Of course, as a sector, we would like to open up as quickly and safely as possible. However, it is still clear we remain at the back of the queue – and the fall guy for the government. How painful and disheartening was it to hear the prime minister say last week “there is obviously an extra risk of transmission from hospitality”. Well actually there isn’t. That has never been proved, ever. Some have said we should be worried Johnson is so ill-informed. I would argue this is a calculated and deliberate line taken by the government, an act of self-preservation. It needs a scapegoat for its failings in controlling the virus ahead of the second wave and we are, sadly, the easiest target. The success of the vaccination programme has given us all hope we will be out of this quicker than we had first imagined but it has also emboldened public opinion that Johnson is doing the right thing, taking the right approach. A survey of 2,500 people for the i newspaper by Redfield & Wilton Strategies published last week found the British public is cautious about easing the rules that restrict shopping, socialising and hospitality venues despite pressure on Johnson to move faster as covid-19 cases continue to fall and the coronavirus vaccine is rolled out. When society does start to reopen, curbs on non-essential shops should be the first to go, according to the public: 38% want shops open before the end of March with another 22% saying they should return in April. The public is most cautious when it comes to restaurants and pubs, 22% saying they should be open by the end of March, 21% saying they should open in April and 50% saying they should not open before May. In terms of the roadmap, a snap YouGov poll found 46% of English adults say the government’s overall plan gets the balance about right; 26% say they are moving too quickly; 16% say they are moving too slowly.

The frustrating part is that we look at other countries, ones far behind us on their respective vaccination programmes and they are opening up their own hospitality sectors before us. And also wasn’t this our route to freedom, but now the fear and frustration is that we are squandering the opportunity presented by the great success of the vaccination programme. Matt Grech-Smith, co-chief executive of Swingers, said: “I’m all for caution and safety, but waiting until 17 May when we will have been closed for six months seems ridiculously extreme. I’m currently in New York City working on the expansion of our business and restaurants and bars are allowed to open at 25% capacity (increasing shortly to 35%). Across the board, these venues are being operated safely while moving incrementally back towards normal trading. When will the UK government recognise hospitality can be opened safely now and stop treating the industry like it can’t be trusted?” As Chris Snowdon, head of Lifestyle Economics at the IEA, wrote: “We’ve got the vaccines, so why is this lockdown set to last longer than the first one? For all the talk of marching towards freedom, nothing is going to change in the next month apart from schools opening and care homes allowing one visitor. By the end of March, after three months of lockdown, we may be able to meet one other household outdoors. For this, we are supposed to be grateful.” From the start of November, the sector will have been closed for almost 200 days by the time May comes around, with just a couple of weeks of heavily restricted trading in December. For operators in places like Leicester, they have been subject to same level of coronavirus restrictions since the first national lockdown in March. Almost a year and half without being able to trade properly beckons.

As expected in April, those that can trade outdoors will be able to but, for many, breaking even is not a possibility. How will they be able to pay rents, rates and bills or afford to take staff off furlough if they are only serving at 10% to 20% capacity? Many will simply choose not to reopen. As British Beer & Pub Association chief executive Emma McClarkin pointed out: “Outdoor service only from 12 April will likely mean three in five pubs across the UK will remain closed. That’s 29,000 pubs still not able to open either because they don’t have any outdoor space or simply because they will not be commercially sustainable. It will mean just 17% of our pubs’ capacities will open from April. That will cost our sector £1.5bn. The government must now plug that £1.5bn hole for our sector.” As Chris Soley, chief executive of north east-based brewer and pub operator Camerons Brewery, warned, the chancellor can’t use “this part-opening as an excuse to pull the rug. It will backfire disastrously”. And what will be the rules of engagement this time? What will be the initial rules on social distancing for indoor venues? One metre apart, or two metres? That 100cm is the difference between a pub being able to operate at 70% capacity or 25% capacity. At 25%, it’s hardly worth opening. That’s before we have to factor in the great British weather, which makes “alfresco dining/drinking” a lottery at the best of times. Can operators afford to invest in more outside areas/equipment?

And before we get to April, let alone May, there is still further cash burn to contend with. Speaking in his usual open and frank way at the weekend, John Vincent said his natural fast food brand Leon has been losing about £200,000 a week and it was “quite possible” the company could fold if lockdown “drags on”. Vincent said the £200,000 figure was more like £800,000 when “what we would have been making” is taken into account. He said: “That’s money that isn’t going into the economy, it’s not going into the wallets of the people who work for Leon and it’s not going to pay the taxes that we need to pay. No one’s asked us for these numbers, so how does the government know what’s going on in the economy?” The pandemic and lockdowns cost hospitality £200m a day in 2020. How much more will be lost before 17 May. And, even then, the proposed 17 May reopening will be with tier one restrictions – rule of six or two households, table service, one metre-plus distancing and capacity caps – all of which means sites will not break even. As Kate Nicholls, chief executive of UKHospitality, said: “It’s vital these restrictions are removed by 21 June and that is seen as the true reopening date – support up to and beyond. When hospitality opened with restrictions last July, it took ten weeks to build up to 70% premises open and 60% customers returning – but it was December before the sector was forecast to break even. It is why business rates and VAT support is needed for the full year.” And, of course, that is if we do open for indoor hospitality on 17 May. As Loungers chairman Alex Reilley highlighted: “Worth pointing out that from the third step onwards, the dates given have a ‘at the earliest’ caveat and that we won’t know until 10 May whether we’ll be permitted to reopen on 17 May or not.” As usual, the government is showing its lack of understanding of how the sector works!

And what can we expect from Rishi? To start with, the chancellor – sector’s “champion”, well it ain’t messrs Gove, Hancock and Johnson – has some ground to make up. Trying his hand at being a Graham Norton-lite talk show host when in conversation with “representative of the sector” Gordon Ramsay, was a terrible PR own-goal. The look – blatant populism, and timing were awful. In a week when chief executives of the country’s leading pub companies have stepped away from taking part in talks with government ministers over the feeling they were being used as “a tick-box exercise”, here was the chancellor breaking bread with a representative of the hospitality sector who many argue doesn’t come near to talking for the industry as a whole. At least you could argue Ramsay is an entrepreneur and has skin in the game, even if he was over-gushing on the support the government and landlords had provided.

Now is a time when we need the chancellor focused and on-point, not working on building “brand Rishi” and his path to the top job. I like to think he still has some goodwill in the bank with a sector he clearly feels he can align himself with. He continues to stand by and defend the Eat Out To Help Out scheme, which rivals, both outside and inside his own party, have used as a stick to beat him with. As I have said before, rather than being reactionary, he is taking all the time he has to make sure he has the whole picture in terms of how the Budget will provide support. However, as I wrote last Friday, I agree with Richard Ferrier, managing director of Brasserie Bar Co, the owner of White Brasserie Company and Brasserie Blanc, that it is a mistake for the government not to announce the Budget and its reopening plans “in lockstep”, because it has the potential to create “ten days of carnage”. On Monday (22 February), Johnson promised he would not “pull the rug out” – sending a clear signal schemes would be extended, prompting many to question why he couldn’t make that explicit now rather than put businesses through another period of purgatory.

It is safe to assume, with Scotland pre-empting things again here, and a final report into the review of business rates now being published in the autumn when “there is more clarity on the long-term state of the economy and the public finances”, that said relief will be extended. UKHospitality chief executive Kate Nicholls said: “If it must be delayed then it is absolutely vital the government uses the extra time to ensure it gets this right. After the misery of last year, a properly functioning, equitable rates system is now more critical than ever. In the meantime, there is now no reason why the business rates holiday should not be extended for another year. Extend this support, along with the VAT cut, at the Budget then deliver a whole new rates system that no longer unfairly penalises our sector.” The question of how long an extension is surely tied into the roadmap his boss provided on Monday (22 February). The furlough scheme is also mooted to be in line for an extension until the summer and then tapered off. The sector’s other important call, to extend and widen the cut in VAT is harder to call, and perhaps the one point that is still up for grabs, and where the dial can still be moved to during the coming days. Will Sunak look to widen its reach, but at the same time perhaps push it up to 10%? The good news is that a number of newspapers, The Sun in particular, have begun to be quite vocal on the VAT cut being extended at its current level, which can only help with a government so enthralled with public opinion and mainstream media courting. Other points the sector will hope are touched on will be: grants to be extended while trading restrictions remain; a 5% cut in beer duty; and the retention bonuses paid/reinstated. If the rates relief and VAT cut extension is offered for six months from full reopening then I think the majority of the sector would take it on top of other targeted support. As Nicholls said: “Hospitality, our wider supply and support chain together with all those other businesses shuttered by government decree need the economy reopening and ongoing support till it is open and beyond.”

As I write this, on the morning after the roadmap announcement, the key feelings are still anger, frustration and a numbness that the sector hasn’t been listened to again. For all the lobbying, letters to MPs and the government, we are still at the back of the queue, their ignorance of the power, size and importance of the sector still baffles. The lack of acknowledgement around how the considerable investment the sector made in reopening safely last year seemingly not even taken into consideration. The understanding of how a business in this sector can operate and break even still manages to escape a government that continues to show a considerable lack of empathy for the industry. The key role our businesses play in communities up and down the country is again ignored. What else could the sector have done? As I have said before, it feels like we are shouting into a void with the government hearing only what it wants to hear. How sad/frustrating was it to hear, many of the mainstream media yesterday peddle out “how much support” the sector has already been given, when most doesn’t even touch the sides, has to be paid for or paid back – for example, equating furlough as financial support for hospitality when it’s actually a cost. However, we must keep fighting and keep believing we can make a difference. Even only marginally “moving the dial” is worthwhile – at every stage.

The political reality is if data after the first and second stages is good, the reopening timetable could well be accelerated, and I’m sure Boris knows the political benefits of under promising and over delivering. He also obviously believes caution is a price worth paying if it means this is the last lockdown. We need to keep shouting (about how safe the sector is/how we can play a key role in the economic bounce back) to make sure if that happens hospitality moves up the queue. Not that this government deserves for us to still have faith, and we can never rule out goalposts being moved again in a negative way, but the silver lining is that we now have a date – 21 June – when most restrictions will be lifted. We now have sight of some dates that we can aim and plan towards. As Jonathan Neame, chief executive of Shepherd Neame, said: “This is the moment we can finally come together again to enjoy everything that defines the great British pub – music, sport, laughter and chat. We are in the business of bringing people together, not keeping them apart.” The dreaded curfew and infuriating substantial meal rules have also gone – to add to the scraps of good news, booking for staycations have already started to lift off. There is a long road ahead until we can reach what will be the longest day of the year. Sadly, the government’s cautious roadmap places further businesses in jeopardy of not making that trip. We know what we are aiming for but we aren’t clear on the support being provided to ensure businesses can make it to the start line, it is going to be a very long and anxious week. Rishi, we need this second act to be a blockbuster, it is on you whether it will be this sector’s Titanic or Escape to Victory. No pressure.
Mark Wingett is Propel insights editor

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