A recently-published survey of hospitality businesses indicates that two thirds of them believe that they will not survive another three months of lockdown.
Survey of 211 hospitality businesses
KAM Media's survey found that two thirds of hospitality companies believe they will not survive a prolonged lockdown without further substantial governmental support. they report that "the vast majority believe a significant break or ‘holiday’ from rent obligations is required".
The study involved 211 hospitality companies (including operators of pubs, bars, restaurants, cafes and street food venues). It found 66% of businesses do not think they can survive a further three months of lockdown measures. A similar picture is likely to emerge for hotel businesses (which were not interviewed for the survey).
Jonathan Downey, the founder of Hospitality Union sent a letter to the Chancellor Rishi Sunak on 20 April 2020 asking for a "National Time Out" under the hashtag #nationaltimeout.
The proposal is straightforward enough - it comprises:
- a 9 month #NationalTimeOut - a #NationalRentFree period for hospitality businesses; and
- a corresponding loan- and interest-payment postponement for landlords, as well as protection for them from covenant breach and debt security enforcement.
Kate Nicholls, CEO of UK Hospitality commented: “Business support needs to be boosted immediately to make sure that every business that needs it can access it. Scrapping thresholds for grants and support with rents will keep businesses alive and keep jobs open."
Who takes "one for the team"?
The suggestion is that this is a "rescue plan for business that won't cost the taxpayer anything" and will "save 2 million jobs in hospitality".
Unfortunately, it does not explain how the solvency of banks will be protected - from what amounts to a 9 month deficit from hospitality assets and a radical altering of their security position - without taxpayer support. Landlords also include insurance companies and pension providers who rely on the rent to meet their obligations to pay insurance claims and pensions (it's not just loan- and interest payments).
Ultimately it is a question of where the pain lands - and there are no easy answers. The taxpayer is already bearing the weight of 80% of the salary for over two million furloughed employees. Landlords are already prevented from retaking possession of premises by "forfeiture" until 30 June 2020 and after one quarter day, already have a £2bn deficit from rent arrears so are resorting to the most extreme remedy left open to them - pushing retail and hospitality tenants into insolvency. Banks have already taken a hit as a result of giving 1.2m homeowners a payment holiday.
Where to go for help
For any business faced with insolvency or if you are a landlord owed rent in arrears - take advice on your options early from our restructuring team or real estate disputes team.