Hospitality firms not receiving insurance payouts

Fewer than 1% of UK hospitality businesses have received payouts for business interruption insurance, while only a quarter of eligible companies have received grants, according to a new survey.

The majority of hospitality businesses have furloughed staff, the survey noted

Trade body UK Hospitality has revealed the results from its first comprehensive survey of the sector during the coronavirus pandemic.

The trade group analysed 378 responses, which cover operators of nearly 21,000 outlets employing more than 370,000 people. UK Hospitality said nearly 90% of the entire sector is closed, with the remainder operating at substantially reduced levels by offering takeaway services.

The trade association said the results showed “flaws” in the level of support provided to businesses during the crisis.

Approximately half (48%) of businesses have applied for loans, however the majority of those receiving a response (57%) have been turned down. Government-imposed state aid rules account for more than a quarter (26%) of refusals, alongside banks telling companies to use their own money first (28%).

Nearly three-quarters (74%) of companies have claimed, or plan to claim, for business interruption insurance. However, UK Hospitality said “their chances of success appear limited” as fewer than 1% of firms that claimed have received compensation.

Around a quarter of eligible businesses have received hospitality grants, which “falls significantly short of government estimates”, UK Hospitality said. The trade body has been urging for these loans to be expedited and extended to more businesses.

The survey reported redundancies were at 2%, with the majority of businesses furloughing staff, accounting for 84% of hospitality sector employees.

UK Hospitality said the figure demonstrates the “huge success” of the Coronavirus Job Retention Scheme and the need for it to be extended as the recovery begins.

Kate Nicholls, UK Hospitality CEO, said: “These findings lay bare the extra work that needs to be done by governments, banks and landlords to make sure as many businesses as possible can survive this crisis.

“Governments across the UK have provided unprecedented support to assist hospitality through this crisis, and that is extremely welcome. Yet, we are in this for the long haul.

“Everyone is rightly looking to how the economy and the industry restarts in a way that avoids a return of this horrific pandemic. Before we get to recovery, we need to make sure that the support measures already announced are getting through to business.

“Loans must be fast-tracked with minimal restrictions, grants must flow to all businesses that need them regardless of size, and the job retention scheme must be amended to reflect actual earnings.”

Last month, UK chancellor Rishi Sunak guaranteed a £330 billion (US$398bn) package of loans and grants to help businesses during the coronavirus outbreak. For firms without pandemic insurance cover, Sunak announced cash grants of up to £25,000 (US$30,000) to support hospitality, leisure and retail companies that are below a rateable value of £51,000 (US$63,000).

Last week, more than 100 bars, pubs and clubs planned to take coordinated legal action against insurer Hiscox for not paying business interruption insurance claims.

Sunak first announced the Coronavirus Job Retention Scheme last month, which will see the government pay 80% of wages for employees who are not working through grants worth up to £2,500 (US$2,900) a month. The scheme, which originally pledged to cover wages from March to May, has since been extended by another month to June.

Last week, UK Hospitality wrote to the UK government to ask them to follow a six-point plan to help businesses reopen following the coronavirus pandemic.

UK-wide approach

Last Friday (24 April), UK Hospitality also welcomed the Welsh government’s plan for recovery from the pandemic, which includes a framework of surveillance and contact tracing alongside seven key questions.

Nicholls called for “much more detail on the what the Welsh government’s seven tests mean, practically-speaking, for businesses”.

She said: “There must be a plan in place well ahead of any eventual reopening of businesses. The focus of the plan must be how we can open safely and viably, rather than when. We do not want to rush the process only to find out that businesses cannot operate and that customers and team members are at risk.”

The trade group also warned there must be a “unified approach to re-opening” across the UK.

Nichols continued: “Different countries moving at different speeds, potentially measuring against different criteria sends a confused message to businesses and customers.

“Businesses will also need continued support after reopening commences. UK Hospitality is working hard to ensure businesses and staff are ready and safe to reopen only when it is appropriate, and we are happy to liaise with the Welsh and UK governments to support.”