It has been a tumultuous year for the hospitality sector since March, and whilst there were green shoots of recovery on 4 July with the grand re-openings, it appears that the sector is now facing a further reverse, with the announcement that pubs and bars in Liverpool will be required to close from today, 14 October, under new Coronavirus restrictions announced by the Prime Minister.
The Government has set out a new ranking system to deal with local outbreaks of Coronavirus, which divides the country into three tiers – medium, high and very high risk. In areas categorised as ‘very high’, pubs and bars will be forced to close, although restaurants, (including pubs and bars that are able to operate as if they were a restaurant), will be allowed to remain open – cue witty Scouse pub landlords offering a pint of Carling as their ‘soup of the day’.
As outlined by the Chancellor last week, in ‘very high’ risk areas, where businesses are forced to close, the Government will cover two-thirds of employee wages as part of an extension of the Job Support Scheme (JSS), with closed businesses also able to benefit from a cash grant of up to £3,000 per month. Whilst these measures will provide continued financial support to hospitality businesses forced to close in ‘very high’ risk areas, those still operating in ‘medium’ and ‘high risk’ areas are coming to the end of Furlough support, and the JSS is unlikely to work for many of them (paying staff in hospitality for more than the hours worked is not a viable option) putting half a million hospitality jobs at risk. Hospitality businesses in tier 1 and tier 2 continue to face restrictions whilst footfall and trade remain significantly down. There is a real prospect of many hospitality businesses becoming insolvent without further government support in the form of grants and enhanced government contributions to the JSS.
UKHospitality has welcomed the increase in grants for closed hospitality businesses, up to £3,000, but repeated its call for a much more comprehensive package of support for the whole sector to cover rent and other overheads to ease the strain on businesses.
UKHospitality Chief Executive Kate Nicholls said: “Paying two-thirds of wages for employees in lockdown is a welcome step and it is encouraging to see that the Chancellor has introduced flexibility and a sector-specific approach into the JSS and recognises that this is an evolving situation. Support for nightclubs and other businesses left in limbo, still unable to reopen, is very welcome. It will help save jobs in a sector that would be sorely missed if it were allowed to die.
However, worryingly, it does nothing to address the issues faced by sector businesses operating well below capacity, due to restrictions and consumers avoiding travel, and struggling to keep their workforce employed.
The mandatory 10:00 pm curfew has been crippling for many hospitality businesses, with sales down around 30% even in areas of low infection. A more comprehensive support package for our businesses affected must follow swiftly if they are to survive the winter and avoid contributing to mass unemployment. If the Government is serious about saving jobs, it needs to rethink the curfew in areas where COVID rates are low.”
The hospitality sector also needs property costs support for businesses which continue to operate. A recent survey found that 82% of hospitality businesses say they need a reduction in rent to survive the coming months as landlord debt builds up. The position is worse in Central London, which has hollowed out, as the majority of office workers continue to work from home.
It will be a long winter for the hospitality sector as pubs and restaurants already find themselves on a cliff edge.
For more information, please contact Martin Jones or your usual UHY adviser.