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Bleak GDP figures highlight damage to UK’s hospitality sector.

New figures have been released showing the extent to which the hospitality sector plays an important part in the UK’s economy. Statistics published by the ONS (Office of National Statistics) shows that the UK economy shrank by 9.9% in 2020 with the output of the accommodation and food services sector now down 51.8% on the previous year.

In addition, analysis from hospitality data analysts CGA, showed a 54% drop in sales across hospitality in 2020, which is the equivalent to a drop of nearly £72bn, making the hospitality sector responsible for one-third of the UK economy’s annual £215bn contraction. This demonstrates how important it is to get the hospitality industry back open again as quickly as possible and pumping money into the British economy. However, after the PM’s latest announcements on the roadmap for recovery, it is now clear the earliest signs of this industry being able reopen will be mid-April/late May, which may be too late for many hospitality businesses.

UKHospitality Chief Executive Kate Nicholls said “these figures make for bleak reading, but also serve to drive home the point about the importance of hospitality as an economic force. When hospitality struggles, the entire UK economy struggles”. She has emphasised continuously, time and time again, the importance the food and drink industry has on the UK economy.

Hospitality Rescue has been helping struggling business owners for over 20 years with sensible FREE advice. If your hospitality business is experiencing problems, contact us FREE on 0800 9700539. Chat to one of our experienced advisers and we will see how we can help you!

Will Pubs and Restaurants Open in May?

With many of us questioning when pubs and restaurants will be opening again, there is finally some light at the end of the tunnel. The government has released a new roadmap for recovery introducing step by step details on what will open and when bringing optimism for the people of the UK.

The Daily Mail states that a ‘blueprint’ is being discussed by ministers and industry leaders that would allow the current restrictions to be gradually eased at four-weekly intervals however, some believe that this four-week interval could be cut down to three weeks, as this is the time it takes for the data to demonstrate the effect of the loosening lockdown measures.

The Mail says that pubs, bars and restaurants will have to wait until early May before they can open their doors again to the public although, rules will be put in place to ensure the safety of the customers. Plans to have a maximum of two households being allowed to sit together indoors have emerged (an increase from the previous one family/household rule prior to the lockdown) and plans suggest a continuation of the ‘Rule of Six’ outside. Is this the future of pubs and restaurants? Hopefully not, with the next stage of the blueprint rolling out in early June we can hopefully see an easing of the ‘Rule of Six’ maybe indoors. The sector is desperate to get confirmation of these proposals so it can plan for a vital busy summer trading period.

Although this is a positive step for many businesses, can they really afford to wait another 8-10 weeks to open? Many owners of pubs are calling for an earlier reopening launch after businesses warned that they would go under unless they were given the green light to get going from the Easter weekend.

The Hospitality Rescue team has been helping owners save their businesses for 20 years with sensible free advice and a range of survival strategies. So, don’t hesitate to contact us now if you’re hospitality business is facing problems. Give us a free call on 0800 9700539 to chat to one of our advisors.

Written by Luke Harris

A new report argues the hospitality sector not a significant area of COVID transmissions

Late last year the hospitality industry was targeted as being responsible for an increase in COVID-19 cases. However, a new report argues that businesses in this sector should be prioritised for reopening, as research shows that they are NOT a significant area for COVID transmissions. A study, commissioned by trade body UKHospitality, from analysts CGA, asserts that hospitality should be central to early reopening plans in 2021 as it continues to be “a safe and well-regulated environment for customers to visit”.

After constant arguments over the July 2020 reopening of hospitality, the ‘Eat Out To Help’ out scheme and the so called correlation of a rapid rise in cases in autumn 2020, reports from public health directors and Public Health England’s weekly surveillance reports, both conclude that hospitality was linked to a low number of cases and is not a leading environment of transmissions that was previously thought. In fact, data suggests that, the rapid rise in cases from early to mid-September was mostly likely driven by the forced reopening of schools.

With data covering the period from 9th July to 19th September 2020, the busiest period for hospitality by far since the pandemic began, shows an average of only 5.2% of infection could be linked to “food and drink“ industry settings, therefore pubs and restaurants should not be held back from reopening. The report urges that consideration of the current reopening roadmap that is understood to prioritise the reopening of non-essential retail before hospitality should be reviewed.

So it’s clear, the hospitality sector is in fact not as much at fault for the increase in cases but actually safer than critics felt.  The report says that far more needs to be done to save this industry which has left many businesses barely surviving and the sector most definitely cannot afford another year with restrictions on the scale of 2020.

The Hospitality Rescue team has been helping business owners for 20 years with sensible free advice. If you are in the hospitality sector and are, like so many others, suffering financially, don’t hesitate to contact us now.  Give us a free call on 0800 9700539 to discuss how we can help.

Written by Luke Harris 

‘Swift’ support package needed as operators deal with ‘flood of cancellations’

Hospitality trade bodies are calling for a speedy support package for the industry after further restrictions announced on the weekend have left operators dealing with a “flood of cancellations”.

Hospitality businesses in Wales were closed on Saturday and it was announced that businesses would be closed in mainland Scotland from Boxing Day, while London and other areas recently put into Tier 3 were put into a new fourth tier, meaning residents will not be able to leave their areas or mix with other households even on Christmas Day.

Home Grown Hotels and Lime Wood Group hotelier Robin Hutson tweeted that the cost of the Tier 4 announcement to his hotels was in the region of £500,000.

Andrew Grahame, chief executive of the Farncombe Estate in the Cotswolds which includes Dormy House, Foxhill Manor and the Fish, tweeted that it had “devastated” business, and although the properties were full for Christmas on Saturday morning, by the evening occupancy was down to 30%.

He added: “Furlough is not enough.”

Managing director of the Vineyard Group Andrew McKenzie said on Twitter that more government support and compensation were needed “to keep businesses afloat and as many jobs as possible intact”, adding that having three closed hotels in Tier 4 “is bleeding us dry”. Restaurateur Mitch Tonks said without guests travelling west from Tier 4 “we are dying on our feet”.

Even businesses in Tier 1 have said they are struggling due to the Christmas period travel restrictions. The Hambrough restaurant and bar on the Isle of Wight, which is in Tier 1, said 90% of bookings have been wiped out over Christmas and New Year following the Tier 4 announcement.

UKHospitality wrote to the prime minister last week requesting a enhanced grants for English businesses, and a clear exit strategy from restrictions.

In an open letter to first minister Nicola Sturgeon, chief executive of the Scottish Tourism Alliance Marc Crothall quoted a hotel business which will incur losses of £600,000 because of the new restrictions.

The letter said: “Your subsequent announcement that restrictions will be tightened for the foreseeable future is clear and understood and is a decisive response to the health risk. The ask of the industry is that the Scottish government now delivers a similarly swift and committed response to the economic consequences of this action.

“An additional upweighted ‘extraordinary’ package of funding must urgently be identified from within the Scottish and UK budgets to support both our frontline businesses and the supply chains over what will now be a significantly more challenging period than any of us had previously understood or anticipated.”

Crothall added that “without a more equitable and upweighted level of support being made available quickly, it is likely that many more businesses will be forced into temporary or permanent closure” with operators now dealing with a “flood of cancellations and have lost much-needed revenue” due to the change in restrictions and forthcoming lockdown on Scotland’s mainland.

He said the scale of job loss will be “grave” without longer-term financial support and the scale of “damage and devastation” to businesses, local economies, communities and livelihoods will be “unprecedented without immediate, more meaningful, targeted and robust support”.

Christmas Saviour or Christmas Killer?

As details slowly emerge about the government’s plans at the end of this second national lockdown, the hospitality sector is asking if this is the “final nail in the coffin” for many pubs, bars & restaurants.

The prime minister announced yesterday (23rd November) that the current 4 week lockdown, due to end next Wednesday 2nd December will be replaced by a revised and tougher three-tier system to try to control the virus in England.

Scotland, Northern Ireland and Wales are all currently subject to their own rules, but the government is working hard to bring the four nations together to agree a joint plan for Christmas and the New Year.

Details, which are expected to be announced on Thursday (26th November) will confirm which areas are to be placed in which of the three tiers. Boris Johnson warned in the Commons yesterday that “more regions will fall, at least temporarily, into higher levels than before” and that the system will last until next Spring.

The restrictions facing the hospitality sector will vary depending on the different tiers and appear to offer little confidence to the sector, which has continued to suffer dramatically during the pandemic, despite taking huge precautions and spending millions on safety.

One thing is for sure, customers won’t be able to stand at the bar and chat to friends, family or colleagues. In simple terms, here’s what the new three-tier system will mean to hospitality:

Tier 1 (the lowest tier) – As previously, establishments can only provide table service, although the 10pm curfew has been extended to 11pm. Last orders will be at 10pm with a strict 11pm closure time.

Tier 2 – Will have to close unless they are serving a ‘substantial meal’ which can be accompanied by alcoholic drinks.

Tier 3 – Hospitality businesses can only offer a take-away service.

Industry body UKHospitality warned the measures would result for more lost businesses and jobs heading into the crucial Christmas season, in a sector that has been amongst the worst hit to date.

Its chief executive, Kate Nicholls, said: “The government is making a point of saying that these measures are needed in order to save Christmas.

“In reality, they are killing Christmas and beyond for many businesses and their customers who look forward to, and rely on, venues being open at this time of year. Sadly, for many staff, it will be a Christmas out of work.”

Ian Wright, her counterpart at the Food and Drink Federation, said: “There is real danger that continued restrictions will result in two thirds of pubs, clubs and restaurants – customers to food manufacturers – closing before the vaccine arrives”.

The Institute of Economic Affairs think-tank said the restrictions would mean a “death sentence” for countless pubs and restaurants. Its head of lifestyle economics, Christopher Snowdon, said: “The government has decided to lay waste to thousands of pubs by requiring a ‘substantial meal’ to be served with drink. There is no scientific basis for this, and it will be impossible for wet (drinks-only) pubs to comply”.

All three are demanding further urgent financial support for the hospitality sector.

Hospitality to close for 4 weeks or more

Again the country is to go into lockdown as Covid-19 cases surge all around the country. This is a big blow to the hospitality sector again. The Furlough Scheme has been extended until the end of November which is good news. The industry is calling out for more relaxed rules about takeaways as currently, alcohol is not going to be permitted in takeaways.

From Thursday, November 5, to December 2, England re-enters national lockdown, which bans all but essential travel, meaning domestic (and international) holidays are no longer allowed. 

Hotels, hostels and other accommodation are allowed to operate only for “those who have to travel for work purposes and for a limited number of other exemptions”. 

What does this mean for the country’s hoteliers? They will have to cancel (or move) all leisure bookings for the dates of lockdown.

Marstons says it will axe up to 2,150 jobs

Pub and brewery group Marstons says it will axe up to 2,150 furloughed jobs following new restrictions to curb the spread of the coronavirus.

The company said since the first lockdown was lifted, 10,000 of its employees had returned to work.

But Marstons said new measures such as the 10pm curfew and restrictions in Liverpool mean 2,150 roles are going to be impacted.

The current wage subsidy scheme expires at the end of this month.

It is being replaced by the Job Support Scheme which will top-up wages for employees who have not been able to return to work full-time because of the coronavirus.

The company said that since 4 July it had reopened 99% of its pubs and “consumer confidence increased steadily throughout July, August and into September”.

However, it said new restrictions such as the 10pm curfew, table-only service and the closure of pubs in some areas of Scotland had undermined consumer confidence.

Marstons said: “The introduction of these further restrictions and guidance affecting pubs is hugely disappointing in view of a lack of clear evidence tying pubs to the recent increase in infection levels, and our own data which suggests that pubs are effective in minimising risks.”

In the 13 weeks since reopening, it said sales were 10% below last year. July recorded the biggest fall, with sales down 26% before turning positive again in August. However, in September, trade dropped by 12%.

Marstons said it has 21 pubs in Scotland, of which eight are currently closed. It also has 18 pubs in the “highest risk” Liverpool region, the majority of which can serve food so therefore can remain open.

Winter Economy Plan will not stop jobs being lost in hospitality

Sales have continued to decline following the 10pm curfew with like-for-likes down 21.2% compared with the week before it was introduced,

According to S4labour, the online labour-scheduling management system from Catton Hospitality, like for like sales are down 21.2% on trade before curfews were put in place for the hospitality sector.  Food sales fell 19.1% and drink by 23.2% on the fortnight before. London has been the worse hit with a 38.4% decrease in sales when compared with last year, whereas there has only been a 5.2% decrease in the rest of the country. S4labour also said it was worth noting roughly 10% of sites are still yet to open after lock-down measures were introduced. Chief product officer Richard Hartley said: “This level of decline is unprecedented and worrying for the industry, although the weather may have played a part. As the curfew has been introduced, diners and drinkers will start to head out earlier, as a closer look at sales shows a larger proportion of sales came in earlier.”

Not surprisingly more than 50% of late-night businesses, such as night clubs and bars have seen a further 60% drop in revenue since the curfew was implemented, The Night Time Industries Association (NTIA) said that 60% of businesses have started to make people redundant.

The Winter Economy Plan is not enough to support the sector according to the research with just under 50% of businesses saying that they will be making more than 60% of their workforce redundant due to reduced support and the current restrictions. NTIA chief executive Michael Kill said: “Our sector must not be under-valued, we need to challenge the government when restrictions result in the systematic closure of an entire Industry. In the coming weeks, without further support, we are facing a catastrophic collapse, which will see thousands of businesses and jobs lost.”

If your business finds itself between a rock and a hard place of needing to make redundancies but can’t afford to do it then a CVA may well be the solution.

Once a proposal is made and the creditors agree to have some of their debt paid back over time then the mechanism can allow big costs to be cut. 

  • Employees can be made redundant at no cost to the company
  • Expensive premises can be vacated at no cost
  • Onerous contracts can be terminated
  • There can be no legal action against debts bound into the agreement.

In addition, the directors have full control of the company, unlike in administration, which almost always results in less return to creditors and a much smaller business if it is sold.

A quarter of hospitality businesses fear going bust

New data from the pub industry released today showed that almost a quarter of hospitality businesses think they will go bust by the end of the year without new government support.

Yesterday Boris Johnson unveiled sweeping new measures to curb a rise in coronavirus cases, including a 10pm curfew on all hospitality firms.

The move, which the sector slammed as “devastating”, heaps pressure on an industry which had just begun to recover from the spring’s lockdown. 

The survey, which was carried out by market researchers CGA on behalf of the British Beer & Pub Association (BBPA), UKHospitality and the British Institute of Innkeeping (BII) before the announcement was made, showed that 23 per cent of their members expect to fail in the next three months unless further help is given.

Thus far, one in eight hospitality staff have already been made redundant, with many more jobs expected to be lost when the furlough scheme ends in October.

Although chancellor Rishi Sunak is set to unveil a new “winter economy package” tomorrow, both he and PM Boris Johnson have heavily hinted that the initiative will not be extended.

On average, the businesses surveyed said that they expected their workforces to be 25 per cent lower this coming February than a year previously – a loss of 675,000 jobs in just 12 months.

In order to stave off such a situation, the bodies have called for a new sector-specific employment package, as well an extension of the business rates holiday and VAT cut on restaurant food.

The proposals echo those made by a group of the UK’s most prominent fast food chains earlier this evening.

Emma McClarkin, chief executive of the BBPA, said that the sector was “already teetering on the edge” before the new restrictions were announced.

She said if the government did not take extra steps to prop up the sector, it would be “unforgivable”

“Only by taking these measures can the Government save our pubs, hospitality businesses and as many as 540,000 jobs. If the Government doesn’t act now it would be unforgiveable.”

UK Hospitality chief executive Katie Nicholls agreed, saying that the future of the sector was “still in the balance”.

“Many venues have still have not reopened and those that have are operating at reduced capacity and a fraction of normal revenue. We have already had some high-profile casualties and far too many job losses”, she said.

“The additional restrictions announced this week place even further burdens on a sector that is operating with razor-thin margins and needs all the help it can get. It is vital that these restrictions are reviewed regularly.”

Business Interruption Insurance policies to pay out over Covid-19

The High Court has ruled in favour of a group of insured businesses. The Hiscox Action Group (HAG) felt aggrieved that their policies provided by Hiscox Insurance didn’t cover loss of business due to the Coronavirus.  The insurers argued that the policies only covered local lockdowns or specific shutdowns on their properties caused by a disease.    The case was brought with the help of the FCA.  16 insurers agreed to be defendants, so that clarity could be provided for wording that was present in 17 different policies. Read more here

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