Kate Nicholls: 'The government really does need to act now, otherwise the administrations will continue'

07 April 2020 by

Kate Nicholls, chief executive of UK Hospitality, has led the charge as the industry battles to survive the coronavirus crisis. She speaks to Emma Lake about the current situation for operators

What are the key concerns of operators speaking to UKHospitality and how are they being addressed?

Cash flow, or the lack of it, is the major issue for many businesses. The government has put in place a very good package and we started to see money flowing through from government last week in terms of grants and the cancellation of business rates and VAT, but it's not coming through at the pace and volume we need and there are still gaps.

What further measures from government would you like to see?

There was a fundamental problem around the two government schemes originally announced. At the top end is the Covid Corporate Financing Facility for large firms, and at the bottom end, for the smaller businesses with a turnover of less than £45m, the Covid Business Interruption Loan Scheme. Businesses caught in the middle – restaurant chains or small- and medium-sized hotels who will have a turnover of more than £45m – found themselves ineligible and we needed support quickly. Thankfully, the chancellor listened to us and announced a revamped scheme with loans available to businesses with turnover between £45m and £500m. That was exactly what we needed.

How urgent was their need for assistance?

If you are in that squeezed and stranded middle, you are reliant on normal commercial banking terms and those just aren't fit for purpose when we're dealing with a crisis of this nature, because the regulatory requirements specifically preclude banks from lending towards working capital or salaries, which is precisely what these businesses need if they are to get through the next three weeks.

The government really does need to act now, otherwise the Chiquitos, the Carluccio's, the Benito's Hats, all of those administrations will continue

Landlords and banks have in some cases proved difficult in negotiations. Do we need further government intervention in these areas?

A number of partners are not playing their parts as well as they should be – in particular on the commercial landlord side. We've seen quite a few landlords not following the guidelines the government has set down in giving a three-month deferment, and a number of landlords taking a very robust stance in terms of debt enforcement, which is just totally inappropriate in the circumstances.

I've seen winding-up orders threatened, but not laid down, and what we need government to do as a matter of urgency is to strengthen the lease forfeiture moratorium and make that a debt enforcement moratorium so that these actions could not be taken. We also need it to make it a requirement, rather than a recommendation, that rent should be deferred for at least three months.

Banks have been very slow to react and slow to appreciate the urgency of the situation. I appreciate they are overwhelmed with applications, but we've had some very disappointing responses to our members who are looking for a simple extension of credit or a small amount of working capital.

Normal commercial banking hasn't been responsive enough – government is telling businesses on the one hand to "stand by your teams and we'll stand by you", but the banks are tying their hands behind their backs and hampering their efforts. We have seen the right noises from the chancellor, but there's more that needs to be done because it is still too slow and too restrictive.

There is also still a real push back from the insurance companies to pay back for anything, even for people who have got special pandemic or notifiable disease cover. This is a particular area of concern that could help a number of businesses in the short term.

How should operators be looking after their employees during this period?

The furlough scheme is a giant lifeboat and we're trying to get as many people into the lifeboats as we possibly can before the Titanic sinks. We all know there has been an acute labour shortage in the sector and there's a real battle for talent, so employers are desperate to keep their teams with them and to do the right thing by them in what is a very difficult situation.

We're seeing many examples of employers putting their hands into their own pockets and not taking a salary or paying their workers themselves, so they don't go without, even when the company has no money coming in. That is going to be an increasing challenge and the longer it takes for the government to set up that scheme, the worse it will get and the more likely we are to have lower-paid workers unable to be paid or businesses going into administration.

We also need the detail of the scheme – it's a very short guidance document we've got, and it doesn't really interrelate with lots of pieces of employment law. My advice has been to look at the spirit of the scheme. This is about trying to protect jobs that have been lost, or would be lost, to protect average earnings and to have a sensible and pragmatic approach to helping businesses through.

There will be plenty of time to get the minutia of the employment law right once we have those details finalised, so let's focus on getting as many people as possible into that lifeboat and confirmed as being on furlough – take away that uncertainty from the workers. Confirm to them there's a job and money coming in on pay day and ask forgiveness, not permission, when the details come through if you've inadvertently done the wrong thing.

Kate Nicholls
Kate Nicholls

Looking forward, the challenges are not going to lift with the lockdown. What ongoing support are you hoping to see from government?

We'll need notice from government about what is happening and, critically, for them not to turn off the life support and business support as we go forward. It will take time for revenues to be rebuilt and, in the meantime, some of our staff won't be able to be fully employed, so we will need furlough to continue.

Looking ahead it's about government helping us get into the right shape to reopen and we need to make sure there's not an expectation that we can start running as normal. We are going to have to have a sensible, pragmatic, grown-up discussion about how we move forward and how we allow for debt and rent to be paid over a longer period of time. It may mean the government making available an additional lending facility so businesses can trade effectively rent-free for a period of time.

Then it's about making sure at the macro level that the government is boosting domestic tourism and the domestic recovery in the short term. I think we can see that global tourism is going to remain disrupted for the remainder of this year and into 2021 and we need the government to encourage domestic tourism to make up that shortfall.

Let's focus on getting as many people as possible into that lifeboat and confirmed as being on furlough

We don't yet know when restrictions will be lifted and seasonal businesses are facing the possibility that much of their annual income being lost. How can they be helped to survive through to Easter 2021?

Seasonal businesses have to make all of their profit between April and the October half term and the longer it takes to reopen, the less likely they are to be able to make any profit – so they're going to be trading at net cash zero. They will need continued government support over the winter months to get through and it's not just hotels and tourism businesses that will be affected, it's the communities that rely on the income that's generated. We will need to look at a coastal community support or tourism industry support package that goes through to the second half of the year while we are in recovery, supported by grants and potentially a continued furlough for the sector.

What do you think of the government's response so far?

The government has been simultaneously dealing with a massive public health crisis, a massive economic crisis and a huge people and society crisis – all of which are independently unprecedented in scale. I think the response has been equally unprecedented in its scale and breadth of vision.

The package the chancellor has unveiled is more comprehensive and more detailed than many other countries are looking at and the biggest criticism I would have is that, because of the urgency and lack of time, sometimes the communication has not been as clear and as logical as would have been expected, but I'll forgive them that due to the situation.

In terms of the reaction to hospitality, I've been really pleased that the recognition has been there from the outset that hospitality, tourism and leisure are the most affected and the most significantly damaged sectors. I think it's been incredibly refreshing to be able to talk to ministers across a wide range of departments and for them to know and be aware of the importance of hospitality and the very real need for them to protect and support those businesses.

What do you think of the responses we've seen from hospitality businesses to support their communities and key frontline workers?

I'm always blown away by hospitality. It is one of the most generous, most collaborative and most supportive industries.

Every time there's a problem or a crisis in this country, hospitality steps up to the plate, so I haven't been surprised by the generosity of spirit shown – even when people are going through some very dark days themselves, wondering how they're going to save their own businesses.

I've never had a request for help refused, and government has come to us with a lot of requests for help. Nobody has said they're too busy or can't look at it now – they've all wanted to jump in and help. We have some fantastic examples of what people have done for their local communities, but also as part of the national effort to tackle this: making beds available for the homeless and NHS key workers; cooking on a voluntary basis to feed key workers, the homeless and vulnerable people; running their businesses sub-economically so they can provide food delivery services, takeaways and shops for vulnerable people in their communities – the response has been phenomenal.

Every time there's a problem or a crisis in this country, hospitality steps up to the plate

It has been recognised by government and we've had references from [prime minister] Boris Johnson, [chancellor of the Duchy of Lancaster] Michael Gove and [secretary of state for environment, food and rural affairs] George Eustice. There's a big thank you that needs to go out to the unsung heroes who are getting the country through this.

There has also been a change of attitude among politicians and the public, who just a month or two ago were talking about these people as being low-skilled and these jobs as being low value, and who are now realising the critical part that they play in keeping the health service going, in keeping our schools going and keeping our communities going –that, for me, is the lasting lesson we have to take from this.

What's your key message to operators at this time?

There's so much help and support out there and people are willing to share. If you are struggling, you don't need to struggle on your own: there are solutions, there's advice, there's guidance – all of our resources are freely available and help and support is just a phone call away.

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