Subscriber login Close [x]
remember me
You are not logged in.

Hospitality cries for help

Published:  07 March, 2022

James Bayley dives into ‘quintuple shock’ looming on the horizon in April, as businesses call for more ongoing support to boost recovery.

Two years on from the start of the Covid pandemic, the full extent of the damage done to the once-vibrant hospitality industry has been revealed – a £115bn loss, according to figures from UK Hospitality.

Hit first and hardest by coronavirus, the sector has suffered a £114.8bn sales loss versus what was expected for 2020/21. With a full 24-months of data available, hospitality – which in normal times generates up to £140bn-a-year – has lost 43% and 45 full weeks of sales since March 2020.

On top of this, the sector is facing a ‘quintuple shock’ in April, with VAT returning to normal, rent arrears having to be paid for amounts outstanding, the national minimum wage rising, rates normalising, and – for many – new energy contracts coming in, which could cost double what they were before.

UK Hospitality CEO Kate Nicholls said last week: “With thousands of businesses closed, many are on the brink of collapse and countless jobs lost. The last thing operators need – and which a lot of them simply wouldn’t survive – is a VAT increase.”

The issue of VAT is front of mind for many businesses heading into April. Duncan Watts, founder of The Curious Group and Jones Family Restaurants, tells Harpers: “I think VAT on hospitality in France is 5%, and I think that would be a sensible cut for the UK.

“If there isn’t any government support then the price to the consumer needs to go up by 20% for businesses like me. Our unit rate for electricity is going from 18p to 42p. Inflation, as far as I’m concerned, is not 5%, it’s more like 25%, which means in London, the price of a pint of beer needs to be £8, but who’s going to pay that?”

Despite the pandemic restrictions, there has been some relief. In the lulls between various lockdowns, the government stepped in on several occasions with various grants and schemes, perhaps most notably Eat Out to Help Out.

“I know this applies to all industries and not just hospitality, but I thought the furlough scheme was great, and cutting business rates for a year was fantastic,” Watts adds.

Mitigating efforts

One of these mitigating efforts was the introduction of zero business rates for hospitality. This was then continued at 50% until the end of March this year, after which normal rates will resume. Some are now calling the government to go further.

“I think business rates are somewhere where the government could help out,” Sara Saunby, co-founder of Salut Wines in Manchester says. “Our rates are half

the cost of our rent, and I don’t think that particularly helps independent businesses. Given that the likes of Starbucks are able to negotiate their rates, I think that could be looked at in order to help independents. If it was a level playing field, I don’t think anyone would complain about it.”

Whether it’s VAT, business rates or inflation, companies large and small have been left with depleted cash reserves and crippling debt.

“Who’d have thought two years ago that we’d now be looking at a once vibrant and dynamic industry brought to its knees?” Nicholls asks. “But with all restrictions about to end, there are signs of hope and recovery. With government support, hospitality – which is full of energetic, creative and entrepreneurial people – must be at the vanguard of the UK’s wider post-pandemic recovery.”