Use covid-style loan scheme to boost hospitality, nightclub veteran urges: A veteran nightclub operator is calling on the government to introduce a covid-style loan guarantee scheme to release investment in Britain’s “logjammed” hospitality sector, reports The Times. Peter Marks, whose career spans four decades in the leisure sector, has proposed that the state underpins a guarantee scheme similar to those that provided support during the pandemic. Such an intervention could help to unlock billions of pounds in private investment to support the high street, he argued, with limited cost to the government if the scheme was carefully designed. He said that finance for the hospitality industry was “logjammed”, and the difficulty in raising funds meant assets were not changing hands and the sector risked becoming stagnant. “We need something to get it moving,” he said. “The market is broken. It is not going to be able to repair itself if it’s not investable.” Marks is chairman of Neos Hospitality and a former chairman and chief executive of Rekom, both of which are bar and club groups. He said many operators were struggling to refinance due to investors’ declining interest in the sector. “I speak to my friends in private equity, I know a lot of the fund managers, because I’ve been around forever, and they say, we can’t see an exit, so we won’t enter,” he said. Marks proposed that the government could underwrite 80% of bank loans to larger hospitality businesses made on otherwise commercial terms to encourage investment in the sector. There is increasing strain in the hospitality industry, which has been hit by rising employment, tax and other costs, declining spending from cash-strapped consumers, and a long-term decline in the availability of conventional bank finance. It has been estimated that bank lending to small and medium-sized enterprises (SMEs) is about £90bn lower than it would have been had it followed the trend recorded between 1997 and 2004. Growth in non-bank finance to SMEs has filled only some of the gap. “What you need to do,” Marks said, “is get the banks to lend to these sectors, because they haven’t been since 2008.” The government has an established loan guarantee programme, the growth guarantee scheme, which provides lenders with a 70% taxpayer-backed guarantee. However, this scheme only supports loans up to £2m. Marks said much more “firepower” was required. “Most of the high street is owned by large institutions and they want bigger businesses as tenants.” Marks said his proposal was “so targeted, it’s like a needle injection into the joints of where the most help is needed. If we can get the debt stream flowing, we can unblock the logjam.” It is estimated that £133bn was guaranteed or disbursed by the government in major loan schemes during the pandemic. The performance of these programmes has been contentious. Rachel Reeves complained last week that mismanagement of the schemes had left the front door “wide open to fraud”. Of the £46.5bn provided under the bounce back loan scheme, the taxpayer has so far provided £11.4bn to fully cover banks’ losses on loans that have defaulted. The pandemic schemes came with a 100% guarantee. Marks said due diligence on the proposed hospitality scheme would need to be stringent and based on normal commercial lending, unlike many of the pandemic schemes, and “lame ducks” would not be backed. He said: “You give them a guarantee loan scheme like you did in covid. But this time, instead of it being a blind loan, they can do proper diligence on companies.” He added: “If the market is broken, the government is completely within their right to get involved, as they did with British Steel.”

Whitbread CEO – hammering hospitality with business rate increases is a bad look: Whitbread chief executive Dominic Paul has told the government that “hammering hospitality with business rate increases is a bad look”. Hotels were hit particularly hard by the business rates reforms announced after last month’s Budget. Writing in The Times, Paul said: “Hospitality is a force for good in the UK. It employs 10% of the UK workforce, creating flexible jobs in every corner of the country, and generates £7bn of investment every year. Whitbread alone is planning to invest £3bn over the next five years, opening hotels that are vital in supporting both tourism and business travel. In short, we are perfectly placed to support the government’s stated growth agenda. I write ‘stated’ because the reality isn’t living up to the rhetoric. A series of hammer blows from consecutive budgets are having a serious impact on the hotel business – on investment, on jobs, on communities. In its general election manifesto last year, Labour promised reform of business rates, a welcome change because the system unfairly penalises bricks and mortar businesses. In the Budget, the chancellor announced ‘permanently lower business rates for retail, hospitality and leisure, funded by higher rates for the most expensive properties such as warehouses used by large online retailers’. The reality for hotels is the precise opposite. UKHospitality has calculated that the budget will increase average business rates for hotels by 115%. One of our Manchester hotels will see a 385% increase in its rateable value. And those warehouses used by online retailers? An increase of only 16%. It’s hard to imagine a bigger contrast between the stated aim and the reality. For Whitbread, the changes could add up to £50m to our cost base next year, on top of £65m this year from the national insurance threshold and living wage increases in the last budget. For many independent hotels, this is a blow which they might not survive. There is another way. Our other big market is Germany, where Premier Inn is growing rapidly towards being the country’s top hotel brand. The German government has realised the challenges hospitality is facing and acted constructively, introducing a permanent cut in VAT to 7% for hotel stays, while restaurants will benefit from the same change from the start of next year. Germany understands the vital role hospitality plays in the economy and society of its towns and cities. That, in turn, creates a much friendlier and more competitive environment for investment than in the UK. It would be a mistake to think that this doesn’t influence the decisions of companies like ours on where to invest their shareholders’ money. And that’s my final point. Investors around the world are watching. They see the UK implementing unfriendly measures towards successful businesses that play a vital role in the economy. At a time when the London market needs all the help it can get, it’s not a good look. We want to continue to play our part in driving growth and creating jobs in the UK. It’s good for our business, yes, but it’s also good for people and communities around the UK. All our industry is asking is for fair treatment and the government to honour what it said in the budget – permanently lower business rates for hospitality and leisure. It’s not too late for it to make good on its promise.”