Kate Nicholls: true scale of crisis still masked by government support

10 February 2021 by
Kate Nicholls: true scale of crisis still masked by government support

The true scale of the crisis facing the hospitality industry will not become clear until it reaches the "cliff edge" of the end of government support over the next two months, UKHospitality chief executive Kate Nicholls has warned.

Speaking to Parliament's Environment, Food and Rural Affairs Committee yesterday (9 February), Nicholls said 10,000 businesses, mostly community pubs, neighbourhood restaurants and small hotels had already been lost in 2020.

The end of the VAT cut, the business rates holiday and the rent moratorium on 31 March and the winding down of furlough in April will devastate restaurants, hotels, pubs and the wider supply chain, she warned.

"That is the point at which businesses will hit a brick wall and will have to make a decision about their future. We will see more small businesses having to hand back keys and a significant number of job losses unless that support is extended.

"The scale of the crisis is masked so far by the support government is able to provide. We are rapidly running into a situation where we just don't have the cash to get through."

Nicholls said it was costing the industry half a billion pounds a month to stay closed under lockdown, equivalent to £10,000 for an average pub and £20,000 for an average restaurant or hotel, while the government support to cover fixed costs is capped at £3,000 a month.

"It's a law of diminishing returns, sooner or later the cash runs out or the business falls over," she said.

Nicholls told the committee that if hospitality was able to reopen in spring the sector could potentially break even by the start of 2022 and return to pre-Covid levels of trading by the end of 2022 and early 2023.

That recovery could be brought forward by nine months if government support is extended, she said.

"We need a clear staged exit strategy. If we're not able to have precise dates we need an indicative line of sight for reopening parts of the sector progressively."

The Night Time Industries Association (NTIA) has warned that 88% of nightclubs owe over two-quarters of rent in arrears, with the sector braced for a "windfall" of landlords taking action when the rent moratorium ends in March.

It is calling on government, lenders, landlords and tenants to take an equal share of the shortfall.

"At this point, we may be able to move forward, and focus on managing the relationships between landlords and tenants, and deliver reasonable commercial terms for the future," said Michael Kill, chief executive of the NTIA.

"The government needs to support nightclubs and late night venues with a robust financial package tailored to support businesses that have been closed since March, and a roadmap giving a clear indication of the timelines for reopening against the backdrop of the vaccination rollout, to give hope to many who are overburdened with debt."

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