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Morning Briefing Strap Line
Fri 23rd Apr 2021 - Friday Opinion
Subjects: Call for evidence on commercial rents, ‘public health’ goes back to its day job, supply matters, London’s heart has started beating again
Authors: Kate Nicholls, Paul Chase, David Read, Julia Wilkinson

Call for evidence on commercial rents by Kate Nicholls

Last month, in this column, I wrote about hospitality and its Grey Rhino – a big, scary and obvious event that’s coming straight at us. And, after a year of lockdowns and restrictions, our Grey Rhino – outstanding rent debt, currently a £2.5bn millstone around the neck of the industry – is thundering towards us.

We have been highlighting for a year now this debt is an existential threat to the future of the sector and jobs within it. The government is now listening and, earlier this month, launched a call for evidence on solutions that will look to address commercial rent debts accumulated by hospitality tenants during the pandemic. This is likely to be the last opportunity to resolve the outstanding rent debt and we would urge hospitality businesses to respond.

To date, the government’s strategy – introducing and repeatedly extending a ban on enforcement action – has just kicked the problem down the road. While this breathing space in the middle of the pandemic has been vital, it has not dealt with rent that is still technically owed – and which will be demanded once that ban expires. Ministers have justified this non-interventionist approach by opting to create conditions for negotiations, through its voluntary code of practice, which (in theory, at least) provides time and space for landlords and tenants to reach agreement on payment of arrears.

However, while there are some notable exceptions and we praise them for their collaborative and supportive stance, we’ve seen a significant swathe of landlords reject this approach and have been heavy handed and aggressive. The time has now come to get this issue sorted.

The call for evidence sets out six options, ranging from simply allowing existing tenant protections to cease, to a more targeted level of support, to having binding adjudications. The level of rent debt in the sector simply cannot be paid off or carried forward so we are calling for sustained and targeted intervention to help tenants and landlords to reach agreements.

Even after the proposed removal of restrictions on 21 June, it will take time for businesses to return to pre-pandemic trading levels. That is why ongoing protection is essential. All businesses will, naturally, hope to reach an amicable agreement with their landlords but, as the call for evidence highlights, the consequence of failing to do so is further economic harm, leading to more businesses and jobs lost.

As a starting point, our overriding principle is that there has to be a sharing of the pain caused by government closures and restrictions. We are proposing full protections remain in place (option three) for a further six months for the hospitality sector (and other sectors affected by closures). This will allow time for a longer-term solution to be developed, establishing the nature of the recovery and what restrictions remain in place (hopefully none).

A blanket binding adjudication (option six) needs to occur that eliminates at least 50% of rent debt for closure periods for hospitality and 25% for periods when restrictions are in place. This is fair and shares the pain. Our view is that individual adjudications are impractical – they will be too slow and costly, and there is insufficient expertise in the market to carry them out at the necessary scale. This adjudication should not affect deals that have already been completed. We also want to see historic debt ring-fenced in a protected state until it can be repaid.

UKHospitality will be submitting its response shortly, and I’d encourage all operators affected by this issue to make their voice heard by the 4 May deadline. The government must understand the scale of this challenge and the varied tenant experiences in dealing with their landlords. Collectively, we can bring down this charging Grey Rhino and help to safeguard the future of as many businesses as possible.

Please take the time to respond to the call for evidence and have your voice heard here.
Kate Nicholls is chief executive of UKHospitality

‘Public health’ goes back to its day job by Paul Chase

Over the past year, we’ve had a painful insight into the dystopian world we would live in if the so-called “public health” approach to managing risk became a new way of governing society. A world in which personal freedom would be severely limited by a public health establishment that doesn’t trust us to make the right choices; a world in which new threats are constantly being conjured up to keep us fearful and grateful to the state for its protection; a world in which personal freedom and personal safety are traded off against one another – not by individuals making personal choices for themselves – but by an all-powerful public health state making those choices for us.

The Big State denizens of Public Health England have seized the opportunity of the pandemic to reset public attitudes to state nannying decisively in their favour. The demise of Public Health England and its imminent replacement by a new National Institute for Health Protection (NIHP) offers an opportunity to leave behind the recent obsessions of “public health” with bans and sin taxes. Going back to prioritising infectious disease control rather than obsessing over the size of chocolate bars, the calorie content of microwave spag bol, exaggerated food cancer scares, the non-existent childhood obesity epidemic, and the belief that everyone is drinking too much, and we all need to cut down, would be a truly welcome development. But I’m not holding my breath.

Dido Harding has been appointed as head of the new NIHP and she will have her work cut out changing the anti-business culture of public health epidemiology and research that permeates the public health establishment. There is some indication that healthist ideologues are recognising public health overreach is leading to pushback – the opposition to covid passports at least for internal use is a case in point – although I still think this is a dangerous possibility we need to guard against.

There are two recent examples of public health getting back to its nannying day job that I’d like to highlight. The first example concerns Theresa Marteau. This lady is a member of the government’s advisory committee Sage, and she is obsessed with the size of wine glasses. She thinks people drink more if they use large glasses and consequently, she would like to regulate their size. Last year, she produced a meta-analysis of studies into this obviously hugely important topic, which didn’t really vindicate her view but, undeterred, she put out a press release calling for wine glass sizes to be regulated anyway.

The public health succubus is predicated on the proposition that you should never turn down the opportunity to flog a dead horse so, on 18 April, just as we begin to reopen pubs and bars, she and 11 fellow “public health” researchers published research into beer and cider glasses that examined whether straight-sided glasses would reduce consumption in on-licence premises compared with curved glasses. Here were the conclusions:

1. Straight-sided glasses do not reduce beer sales in bars versus usual glasses.

2. Usual beer glasses are predominantly curved but there are many different types.

3. Other interventions may warrant attention, such as reducing serving sizes.

The things you do in pursuit of a Nobel prize.

The second example is the government is considering mandating calorie counts on beverage alcohol products. We’re told this isn’t anti-alcohol, but part of the anti-obesity strategy. It follows on from the plan to force food outlets to publish calorie counts on menus. I can’t quite decide whether this is a hill we should be prepared to die on or not. Certainly, I can see the cost of this – estimated at £92m – is unwelcome, particularly at present. In principle, I have no objection to consumers having product information so they can make well-informed choices. And there is a difference between health information and health warnings – particularly when those health warnings are health scares based on junk science such as the current low-risk drink guidelines.

Accurate information available on a label or beer font facilitates rational personal choices by consumers, so is not, in itself, a nannying measure. But then I remind myself where this proposal comes from: the public health lobby. These people are not interested in facilitating better information for consumers so they can make more rational personal choices; they’re interested in reducing the scope for personal choice. One way to do this is to persuade government to put more and more health warnings and information on product labels, which slowly, but surely, reduces the amount of space left for branding.

Public health recognises the strength of brands is key to the long-term commercial strategies of brewers and distillers, so anything that weakens branding is grist to the mill of public health nannying in relation to alcohol. The goal is plain packaging for bottles and cans – following the tobacco products playlist. Plain packaging is all about de-normalising alcohol use and this is the context in which we should view the calorie count proposal.

I wish Harding good luck in her new public health role, but I fear the new NIHP will re-employ the public health old guard and old obsessions will reappear in new guises as “public health” goes back to its day job.
Paul Chase is director of Chase Consultancy and a leading industry commentator on alcohol and health

Supply matters by David Read

This week we have published a white paper called Supply Matters. We want it to signpost a radical new agenda for the supply of food and drink to the hospitality sector, with the aim of encouraging debate and collaborative action from those involved in the eat-out-of-home market. We feel this is needed because while the pandemic has brought our sector to a crisis point, and we must focus on the immediate recovery, there are other risks and opportunities present that require our attention if our sector is to tread a safe path to a more comfortable future.

Hospitality sits at the consumer-facing end of a huge and complex value chain. Farmers, processors, manufacturers, wholesalers and distributors all contribute to the everyday miracle of putting affordable healthy fresh food on every diner’s plate. In the past year, hospitality has seen about £200m of lost revenues every week, accrued more than £2bn of unsettled rent and more than £3bn of debt through the Coronavirus Interruption Business Loan Scheme. But it’s not just about our operators, the whole value chain has (even without the additional stress of Brexit) paid a very heavy financial price in the past year. Shoring up balance sheets has never been more important – for us all. The whole value chain, from farm-to-plate, requires a quick return to positive cash flow to pay down debt and to create investment in both assets and jobs. Efficiency and waste elimination is more important now than it has ever been. 

But there are other factors at play. We must react to a potentially greater threat because our food system is taking a wrecking ball to the planet we all call home. Feeding the world creates up to one third of all greenhouse gas emissions globally, feeds one third of the globe’s grain harvest to animals and produces two thirds of our global livestock on factory farms. Just 4% of all mammals on the planet still live wild. Change in our food system, of which we are all custodians, is overdue and unavoidable. Our customers are increasingly demanding it and it is in our own interests to rise to the challenge.

In spite of these great challenges, the current landscape really is full of opportunity and there exists much promise for the future. Many of the tools that we need to transition successfully are at hand or under development. Science and technology in food and drink is giving our sector unprecedented numbers of opportunities to innovate. We simply need to engage and invest – boldly and wisely. Vertical farming, meat substitutes and lab-grown meat are just a few of the food tech options now increasingly available to operators and new software developments in blockchain and cloud computing raise the prospect of more transparent, efficient and joined-up supply chains.

At Prestige Purchasing, we believe there are five key themes for change which we have set out in Supply Matters – it’s available to download for free from our website www.prestige-purchasing.com/supplymatters.

In summary, these themes are:

• One value chain – where we need to develop a greater “whole-system” approach to improve resilience and create greater transparency, knowledge and efficiency from farm-to-fork

• Long-term collaborative relationships – taking a new approach on key supplier selection to more closely align incentives, create longer and more stable relationships and, thereby, create increased value over time

• Smart supply chains – by the eliminating the sub-optimal ranging, sourcing and distribution strategies common in our sector, to avoid costly and needless inefficiency

• Low waste and sustainability – improving sourcing to reverse the many undesirable environmental, economic and social outcomes of our food system, including the reduction of operational and supply chain waste

• Innovation and new product development – embracing the innovation under way in science and technology within food and drink, to enable better outcomes from all of the Supply Matters themes

We are engaging with key suppliers and operators in the weeks and months ahead to accelerate the debate on these essential themes for change. Watch out for the interviews that we will be publishing in webcast and podcast formats with chief executives of both suppliers and operators in the weeks ahead. And let us know if you would like to get involved in the conversation – via the prestige-purchasing.com/supply matters web page, or simply by calling me for a chat on 07785 284770. After a year locked away behind laptop screens, we urgently need dialogue to create energy and direction for the future.

It’s our strong belief that our supply chains simply cannot afford to return to pre-covid status quo. Trading our way out of the pandemic looks like a very hard and long road. Instead, we must rely on our ability to innovate and collaborate, finding new and better ways of sustaining the sector we love and the planet on which we all depend.

This is why Supply Matters.
David Read is founder and chairman of Prestige Purchasing
Prestige Purchasing is a Propel BeatTheVirus campaign member

London’s heart has started beating again by Julia Wilkinson

What a difference a day makes. From deserted, silent streets to the hubbub we have all missed for too long, the West End was roused last Monday from its forced hibernation, literally, overnight and it was a joy to behold.

The sounds of laughter, of friends, family and colleagues reconnecting, resonated wherever I walked through Carnaby, Soho, Chinatown and Seven Dials last week, and it had the same effect on everyone. It made us all smile and, for the first time in a while, feel like life is good again. Or at least, is getting there.

People are genuinely pleased to be back, and it is not just the customers enjoying their first restaurant, cafe or pub visit for several months. Every operator I spoke with was excited to be doing what they love once again. Every single one. While not forgotten, or remotely behind them yet, the financial and operational challenges of the past year have become a little easier for those that were in a position to reopen with access to alfresco dining.

Landlords and local authorities have also worked hard to do all they can to support business in practical ways, from the provision of more seating – there are now more than 3,000 external covers in the case of Shaftesbury’s portfolio – and the welcomed relaxation of some licensing rules to encourage an alfresco way of life.

The vast majority of visitors understand what is needed of them as individuals too, in terms of social distancing and other behaviours, to make the experience a safe and responsible one for all West End stakeholders. From the evidence of my time in the West End so far, a new workable normal is quickly emerging and central London is getting back to doing what it does best: beating hard for the whole of the capital.

But the big question is, where next? We have the anticipation of reopening indoor dining in just a few weeks, which, for some, will be the first time they welcome back customers because not everyone had access to sufficient outside space to make it work financially at the first stage. Beyond that, the most anticipated date remains 21 June, when the industry remains hopeful unrestricted trading will be possible, being the watershed moment for many operators to finally trade fully and profitably.

In reality, however, the industry still needs so much more. The West End needs so much more.

Crucially, we all need clarity from the government on fundamental structural issues – business rates, rent moratoriums and online sales tax for retail; on operational questions – vaccine passports, licensing and long-term, integrated alfresco dining; and behavioural aspects – when can office workers return with confidence and in significant numbers, and at what point will the green light go on for international tourism?

Without having certainty on these issues, the initial relief and fervour of reopening will be harder to sustain.

And from everything we are seeing and hearing, the West End is ready to recover. There have been a number of new operators signing for space already, many of whom are new to London and seeking a flagship presence. There are also existing brands diversifying; in some cases, turning an offline business or dark kitchen concept into customer-facing bricks and mortar sites. Start-ups are seeking space for new ideas, while previously unavailable prime locations are more accessible than they have been in decades, with the loss of often tired branded sites creating fully fitted (and therefore lower capital expenditure) opportunities for a new wave of hospitality entrepreneurs. The market is gaining momentum at a pace that matches the evident consumer desire to return.

All that is needed is an extra shot of adrenaline from the government to allow plans to be finalised and for the recovery we have begun to enjoy to be sustained. After all, every city needs a strong heart and London’s is, emphatically, the West End.
Julia Wilkinson is restaurant director at Shaftesbury

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