Quarter of hospitality businesses think they will fail

24th September, 2020 by Nicola Carruthers

Almost a quarter of hospitality firms in the UK believe their businesses will collapse by the end of 2020 without further government support.

Spirits Bottles

The survey found hospitality businesses believe their workforce will be 25% lower by February 2021

The findings, which were conducted by CGA, came from a survey of members from trade associations UK Hospitality, British Beer & Pub Association and the British Institute of Innkeeping. It found that 23% of members think their businesses will not last until the end of this year.

The results were revealed after the UK government enforced a 10pm curfew for pubs, bars and restaurants in England from today as coronavirus infection rates rise. The government has also implemented table service only rules for venues that serve alcohol. Similar measures are also in place across the rest of the UK.

The survey found that one in eight hospitality workers have already been made redundant, while more industry jobs are expected to be permanently lost when the furlough scheme ends in October.

On average, the survey found businesses believe their workforce will be 25% lower by February 2021 compared to February this year. This represents a decline of 675,000 jobs across the sector over the 12-month period.

Furthermore, just 7% of respondents said they were feeling optimistic about the future of hospitality over the next 12 months, a stark contrast from when the same question was asked in August (23%) and July (19%).

The trade groups are now calling for a sector-specific employment support package to help the businesses survive “further disruptions to their operations”.

Kate Nicholls, chief executive of UK Hospitality, said: “The future of the sector is still very much in the balance. Many venues have still not reopened and those that have are operating at reduced capacity and a fraction of normal revenue. We have already had some high-profile casualties and far too many job losses.

“The additional restrictions announced this week place even further burdens on a sector that is operating with razor-thin margins and needs all the help it can get. It is vital that these restrictions are reviewed regularly.

“We need comprehensive financial support so that those businesses that survive the winter can begin to rebuild next year, starting with a package of measures to support short time working. The VAT cut for hospitality must be extended through 2021, as must the business rates holiday.

“We also need the government to step in now and help to deal with the rent debt that has built up over months of enforced lockdown.”

New measures

The results of the survey were published before UK chancellor Rishi Sunak announced his new Jobs Support Scheme today (24 September), which will replace the furlough scheme. The new scheme will see the government pay up to two thirds of employees’ hours for six months from 1 November.

In addition, Sunak cancelled the planned increase of value added tax (VAT) for hospitality and tourism from 5% to 20%, which was due to come into effect in January. The 5% VAT rate will remain until 31 March 2021.

While Nicholls welcomed the new job scheme, she called for more specific support for hospitality.

She said: “The announcement of flexible employee support is a move in the right direction, but hospitality needs more targeted efforts to support jobs. Almost one million people in our sector are still on furlough. We need government to go further in hospitality, recognising the greater restrictions imposed upon us, and pick up the full cost of unworked hours. This would be a relatively low cost for huge reward for our workforce. Full support to sustain people in their jobs during what could be a pretty bleak winter for hospitality would be a great step forward.

“Looking ahead, the extension of the VAT cut was absolutely critical. UK Hospitality had pushed hard for it, so it is great to see the government taking note of our major concerns about recovery into 2021, though this must be extended further.

“The announcement of longer tax deferrals and the option of longer loan repayments should deliver some much-needed breathing room for employers.

“Things were looking grim for our sector yesterday and we were desperately hoping for some good news. The chancellor has given us some reason to be positive again, but we urge him to engage with the trade on specific measures to keep people in work. While some of these measures announced today will give businesses a future to shoot for, and hope that they can begin to rebuild, we are still not out of the woods.”

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