Has the government called last orders for the hospitality industry?

By Melissa Welch, Corporate and Commercial Associate

At Primas, we work with lots of businesses in the hospitality industry and have done our best to support them during the ups and downs experienced by the sector during the COVID-19 pandemic.

Undoubtedly, this sector has been hit extremely hard, and many bars, restaurants and cafes have feared for the future of their businesses during this time.

Now that the government has lifted restrictions and allowed these businesses to open their doors to the public again, it is important to recognise that they are far from being ‘out of the woods’. With anxieties around COVID-19 still high, it could be a long time before we see the hospitality industry begin to thrive as it did before the pandemic.

With the unfortunate news that Bella Italia and Café Rouge recently went into administration, with Café Rouge closing 91 sites and confirming 1,900 jobs lost, there is an argument to suggest that the so-called ‘casual dining sector’ has been the worst hit by the financial implications of COVID-19.

The government’s newly implemented “Eat Out to Help Out” scheme has been brought in as an effort to keep this struggling industry afloat. The government will be incentivising the public to get back out into restaurants and pubs by providing them with 50% off food bills Monday to Wednesday between 3 and 31 August, with the discount capping at £10 per head.

This is an encouraging move for the sector, but similarly to the furlough scheme, businesses will need to bear the brunt of the costs before being reimbursed from the state purse – albeit this should be within five working days. I can’t help but wonder if this incentive is persuasive enough to encourage the most anxious in our communities to go out and spend money, but only time will tell.

While insolvencies have slowed in the recent past, likely due to the government-issued mortarium (which Chris Love wrote more about here), the unfortunate reality is that once government support, specifically the furlough scheme, is taken away, many businesses may still be faced with insolvency.

Excessive rent, costly business rates and ever-increasing staffing costs have made it difficult for the hospitality industry to thrive in recent years, and it is hoped by many that they can bounce back. But more needs to be done in the short term to support their long-term vision, if not, we risk seeing these businesses simply disappear.

However, it could be argued that many small businesses have had generous government support during lockdown, and it is hoped that local independents will still be standing at the end of this.

Around 1 million ‘Bounce Back’ loans have been claimed, which will no doubt have been a much-needed lifeline for many small businesses. We wrote more about Bounce Back loans here, but to me, these seem to have been the most accessible and effective government bail-out schemes during this crisis.

For me, and from speaking to contacts in the industry, it is apparent that the government schemes have been invaluable for smaller, independent businesses. These people-led businesses are using them to reinvest in their staff, to keep jobs, and to diversify and reshape their service offering, so that they were able to remain operational during the lockdown period.

Arguably, COVID-19 and the government’s efforts to support the economy serve as a valuable lesson to bigger corporations who didn’t have plans in place for a global disaster such as this. It’s encouraging to see small businesses being represented and supported, but when thinking about the hospitality sector as a whole, more needs to be done to keep them going.