20
July
2021
July
2021
One year on, the future of the hospitality sector is still uncertain, but as the country begins to fully reopen, we can only hope that the sector begins to bounce back.
By Chris Love, Partner and Head of Corporate Recoveries and Insolvency
With Freedom Day and the end of lockdown fast approaching, there seems to be a light at the end of the tunnel for the hospitality sector. After over a year of anxiety and worry, from 19th July, restaurants, bars and cafés should now be able to fully open their doors and return to a form of pre-Covid normality.
The hospitality industry has undoubtedly been one of the hardest-hit sectors by the pandemic, with its economic output falling by 90% in April 2020 compared to February 2020.
Around a year ago, we outlined the government’s efforts in supporting the struggling industry. One year later, it’s time to see how these efforts have panned out and discover if they truly supported one of the worst affected sectors by the pandemic.
Eat Out to Help Out
Probably the most well-known government scheme was Eat Out to Help Out (EOTHO) which ran between 3 – 31 August 2020 and gave the public 50% off food bills Monday to Wednesday, with the discount capping at £10 per head.
The aim of the scheme was to incentivise the public to get back out into restaurants and pubs and help revitalise the hospitality industry. At the time, many people enjoyed the scheme but almost one year, on what was its true impact?
According to a London School of Economics report, the scheme only had a ‘limited effect’ on UK restaurants and bars, with any rise in visitor numbers and job vacancies being temporary. Although EOTHO increased UK restaurant and pub visitors by 5-6% during August, this did not continue into September after the end of the scheme.
Additionally, research from Warwick University suggests that the scheme caused a significant rise in new coronavirus infections. This, combined with the short-term economic benefits, shows EOTHO not only to have had merely a temporarily positive effect, but also to have contributed to an increase in cases.
Although the scheme undeniably helped improve the UK’s general morale, in the long run unfortunately, it did little to support the hospitality industry.
‘Bounce Back’ loans
Another government scheme was the Bounce Back Loan Scheme (BBLS), explained in our blog here. The loan was aimed at small businesses and allowed them to borrow up to 25% of their turnover up to £50,000, with no interest charged or repayments in the first 12 months. After 12 months all banks charged a fixed 2.5% annual interest – much cheaper than the average loan.
Now, one year later it’s time for some businesses to start repaying, and now the government has also introduced a new scheme to help those struggling – the Pay As You Grow scheme.
This scheme allows borrowers to request an extension of their loan term, to take a repayment holiday of up to six months and/or to only pay back interest on repayments for up to six months.
This business-focused government scheme has had a great impact on small businesses, especially those who haven’t been able to fully reopen yet or are still running on limited capacity. These small businesses have benefitted from government support during lockdown, allowing them to keep their doors open (or reopen them at the end of lockdown).
Coronavirus Job Retention Scheme (otherwise known as furlough)
Over the last 12 months, furlough has been extended a number of times, in line with the changing government guidelines. Unfortunately, the same problem persists though: the end of government support may lead to many businesses facing insolvency.
At present the government is winding the scheme down, currently paying 70% of salaries and, in August and September, reducing this percentage to 60. It seems unlikely that the policy will be extended again, leaving lots of businesses in the lurch come October due to the lack of governmental support.
It’s evident that the government’s schemes have been key in supporting businesses throughout the pandemic, particularly hospitality businesses. Unfortunately, their resources are not infinite, and they must come to an end at some point.
One year on, the future of the hospitality sector is still uncertain, especially with furlough coming to an end. As the country begins to fully reopen, we can only hope that the sector begins to bounce back with more government support perhaps being needed in the future.
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If you need further support or guidance on post-pandemic recovery and your options, please contact me directly on chris.love@primaslaw.co.uk
