Coronavirus: Has Covid-19 killed the hospitality industry in the UK as we know it?

Cara Houchen

Cara Houchen

Editor 24th April 2020

The Staff Canteen Editor, Cara Houchen, spoke to a panel of experts about the future of the UK’s hospitality industry. She picks out some of the key points below - to watch the full interview see the video above. 

Coronavirus. It’s a word most of us had never heard of and now it drops into our vocabulary every other sentence, along with social distancing and lockdown. It means so many things to so many different people, but to the hospitality industry it could mean the end of life as we once knew it.

Will it all just blow over?

Just as every other hospitality professional whose livelihoods are threatened by the current crisis, Richard Corrigan, chef and owner of a number of restaurants in London and Ireland, hopes that once the lockdown is over, people will return to restaurants.

“The nature of human beings is breaking bread and sharing wine. Six months or a year is not going to stop that,” he said. “You’re going to be one lonely bastard eating and drinking on your own! The industry will come back and in five years’ time we’ll remember these days and it will make us remember how important our customers are.”

However, the chef does fear that government policy could still let the industry down.

“This is time for humanity, it’s a time to hold hands, come together and it’s time for British hospitality to be stronger and more politically aware. We’ve worked really hard over the past 30 years in defining what food and hospitality is in Britain, and I think it’s one of the finest in the world right now. It would be dreadful if that was wiped out by a lack of foresight by the government and civil service.”

What the government can do to help: rent waivers, VAT write-offs, a furlough extension

Since March, thousands of workers across the industry have already lost their jobs. Millions of pounds worth of income has disappeared and businesses across the sector have closed their doors, with no real idea of when they may reopen. And although they may be closed, businesses are still accumulating a lot of debt.

Amanda Afiya, former editor of The Caterer and founder of Sauce Intelligence has had her income virtually wiped out. She says calling for a rent holiday is not enough, ‘it needs rent to be waived completely for a month or two’.

“If pub companies and landlords insist on getting their money, they are going to push these businesses out of business completely and they are going to end up with a lot of property on their hands.”

Joe Clark runs The Nags Head in Little Hadham, one of 500 Greene King pubs across the UK. It is contractually obliged to purchase stock from the business owner, on top of £3k a month rent - which the company is currently charging in full.

Joe is one of several pub tenants supporting the ‘No Pub, No Rent’ campaign, which aims to help others in the same situation as him, who are still being charged rent on closed establishments.

He said: “Greene King are allowing us to defer, but that puts a huge rent on at the end. It is a worry because every week we’re accumulating debt and we don’t know what we are opening into.

“The communication from Greene King is telling us what the government is saying but we want to know what they, as a company, are going to do to help us.

“The longer it goes on, the harder it is going to be to open up. I don’t want to lose the human aspect – we are a community pub and we pull people together. But if you can’t bring that back, I don’t really see what the future is in a pub like this.”

As an industry which is so reliant on cash flow, it is important that the financial burden is shared as equally as possible. The government is coming under more pressure to support the industry in terms of pausing rent, VAT and business rates and the continuation of the furlough scheme.

“We’re going to need a lot of money to open, and that scares the living monkeys out of me,” Richard said.

“There’s no way you can pay half a million pounds rent to landlords in London with absolutely no business whatsoever.”

He also discussed the idea of a lease pushback of 18 months on properties' current terms. In Ireland, he explained, the government is looking at a zero percent VAT rate for the opening period.

"A three-pronged approach"

While it is all too easy in these times to call for government action, he stressed, that alone won't be enough to keep the industry afloat.

“We can’t ask the government to do everything," he said. “We really have to be clever in this. The VAT approach has to work, the rates approach has to work, and the landlords approach has to work. It’s a three-pronged approach, some of it government, some of it private but it all needs some sort of legislation.

“For us to survive, we need legislation to allow us breathing room to get up and running.”

Furlough is keeping everyone afloat for now. But what happens after June if it does end? As an employer, having a conversation with your team about letting them go will be heart breaking and many of those employees will have been loyal to establishments for many years.

“99.9 percent of everyone employed in the restaurant industry will be unemployed,” said Richard. “There will be no question about it. Restaurants rely on what comes in the door and what goes out the door.

“If furlough stops, there will be mass unemployment. It will be a complete disaster.”

It’s surreal to think only a few months ago we were worrying about Brexit and skills shortages and the loss of an incredible multi-cultural workforce. Now we are facing millions being out of work.

Robin Hutson, Chairman and CEO of the Limewood Group said: “For new businesses starting out this is just suicidal. I don’t know how you come back from it.

“There needs to be some honesty about timings and assurance from government that they will continue to support through furlough until the industry can operate in some sort of normal fashion. Plus, legislation around rents and leases put in place at the same time plus VAT."

Many will be chomping at the bit to get back to work in hotels, bars and restaurants, but according to a recent YouGov survey, more than half of consumers are nervous about returning to places where they could be in close proximity to other people.

Robin explained that for him, it's better to stay shut and wait rather than risk a false start which sees businesses forced to close again.

He said: “You’ve got opposing factors. On one side, you have a pent-up demand, but then you have a confidence issue on the other side. Ultimately, a vaccine is the only way out of this, and if that takes 18 months or two years, then that’s how long it takes.”

Socially-distant dining, anyone?

Social distancing rules are expected to still be in place even after the lockdown ends, with some saying they could last into 2021. One of the proposed solutions is that restaurants which once could seat say 50 people will see the amount of covers drop by half in order to comply.

But that brings its own range of problems, Joe explained: “If I’m having to drop covers by 50 percent it’s going to make it very difficult to recoup the money we’ve lost and owe.”

Amanda can't see it working at all.

She said: “I know a lot of chefs and people in the industry want to get back to work, but we don’t want to reopen until the consumer confidence is there.”

Plus, Robin remarked, customers might not warm to the idea of regimented fun.

“If you put so many restrictions in place that it ceases to be an enjoyable evening out – people will stay at home anyway,” he said.

A new dawn for the hospitality industry?

It seems everyone is in agreement that it is the unknown which is the really difficult thing to manage.

“The opening up is the big worry for most of us,” said Robin. “The worst of all situations is if they lift the restrictions on movement, impose social distancing and stop the furlough.

“If those three things come together, we are all dead in the water.”

Robin ventured that there might just be some light at the end of the tunnel.

“If the government can get its head round the importance and the ripple effect of what’s happening in hospitality, it may change the perception of hospitality forever," he said. "That would be a wonderful legacy out of this – that actually we got taken seriously.”

In these challenging times…

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Cara Houchen

Cara Houchen

Editor 24th April 2020

Coronavirus: Has Covid-19 killed the hospitality industry in the UK as we know it?