The sector is beginning to bubble but will still need government goodwill to prosper, says insider
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While photos of customers celebrating being back inside pubs and restaurants were splashed all over the media this month as the sector reached a milestone in the road to recovery, it was still far from a champagne moment for the industry.
For the majority of hospitality businesses this was the first time they have been able to open since December, as just one-third of venues had the space to open outdoors in April. That’s five long, hard months without revenue, preceded by many more months of heavily disrupted trading since the start of the pandemic.
Even with indoor trading resuming, venues cannot hope to turn a profit with the current restrictions in place. Social distancing and other trading restrictions increase business costs by, on average, almost a quarter, while constraining revenues by a similar level. This results in a net fall in profitability of almost 50%, which is quite clearly unsustainable. Consequently, for the vast majority of operators, this month has been a psychological reopening, not an economic one. At this point, any delay to the removal of restrictions on 21 June will be nothing short of catastrophic for a sector that has already lost £80bn in sales – two-thirds of its pre-pandemic revenue – over the past year.
Hospitality has proven it is a safe setting since it initially reopened last July. Operators have spent enormous sums investing in equipment, staff training, extra cleaning, and other measures to ensure venues are Covid-secure, efforts that were rewarded last summer when there was no subsequent rise in cases as a result of the impact of the eat out to help out scheme. We have long been used to running regulated and responsible venues.
While the emergence of the so-called Indian variant has been worrying, fortunately there is little evidence at this stage to suggest it will cause a surge in hospitalisations or deaths and the vaccine rollout is progressing at pace, so there is no reason that the government should deviate from its stated reopening roadmap. Should there be one, it needs to be communicated well in advance and come with further support for a sector that employed 3.2 million people prior to Covid – the third largest private sector employer in the UK.
Any delay means the decision to reintroduce business rate repayments for the sector from 1 July would have to be reversed and delayed until at least October. Commercial rent protections would need to be further extended – not to do so would certainly lead to evictions, job losses, business failures, and more boarded-up units blighting Britain’s high streets. The government would also need to look again at the future of the furlough scheme, as operators will not be in a position to contribute further if they are still trading under restrictions. This would inevitably result in large numbers of job being lost.
Longer term, the government needs to look at making permanent a lower rate of VAT for hospitality goods and services. This would allow operators to compete with comparable businesses in other countries and allow them to invest in their teams, venues and communities, and to build sustainable operations for the future. It would be a strong signal of confidence and encourage people to come out and support their local pubs and restaurants. This is crucial as hospitality plays a fundamental and cohesive role in the nation’s recovery from the misery of Covid.
We have proved that our venues are safe and are the homes of safe socialising. It is essential that we continue on the government’s roadmap with no delays to the removal of restrictions next month.
Only this will enable the thousands of UK hospitality businesses to get back to what they do best – and power the engine of our economic and social recovery.
Kate Nicholls is chief executive of UK Hospitality
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