Covid-19: Impact on the Pubs & Restaurants Sector

Update as of 23/03/2020

On Friday 20th March 2020, Boris Johnson took an extraordinary step in the fight against COVID-19, ordering the closure of cafes, bars, pubs and restaurants across the UK, with cinemas, nightclubs leisure centres and gyms to follow. Takeaway venues are to be exempt at this stage.

Despite this disappointing news, it is pleasing that Chancellor Rishi Sunak responded decisively and quickly with a raft of further wage support and tax relief schemes for affected businesses and employees.

The latest measures include:

• A Coronavirus Job Retention Scheme which will see the government cover 80% of employee wages (up to £2,500 a month) for employees not working but kept on payroll rather than being laid off. This is to be backdated to March 1st and open for 3 months initially, with the view to extend if needed
• VAT relief: deferring VAT and Income Tax payments for the quarter (20th March to 30th June), representing a £30bn injection into the economy. Taxpayers will be given until the end of the 2020 to 2021 tax year to pay any liabilities that have accumulated during the deferral period
• The self-employed will get full Universal Credit at a rate equivalent to statutory sick pay and a further £1bn to cover 30% of house rental costs
• The Business Loan Scheme will now be interest free for 12 months
• Universal credit allowance increases of £1,000 a year, with the next self-assessments deferred until the start of next year

Whilst the sector is very grateful for the unprecedented level of support, an area of concern which requires further attention is rent. In light of the fact the range of government benefit schemes are not yet available for operators, this is a substantial amount of money that operators are required to pay.

UKH and other key trade bodies are currently lobbying the government to enact a moratorium on commercial landlord sanctions, as has been announced for residential properties, ahead of the quarterly due date this Wednesday 25^th March, as landlords currently have substantial sanctions available to them – winding-up notices or foreclosure in particular, for those operators who will financially struggle to meet the due date.

We are working closely with these trade bodies to support their efforts and urge the government to implement the temporary suspension to support renters today or Tuesday.

 

More information

All of the measures that have been announced so far can be found here.

 Visit the UKH website

Key trade body, UK Hospitality have created a dedicated COVID-19 page on their website and are regularly updating this with advice, guidance and support on employment, contracts and accessing the various benefit schemes. This can be found here.

 Visit the BII website

Similarly, the British Institute of Innkeeping (BII) website has created a dedicated Covid-19 webpage that can be found here.    

Contact HM Revenue and Customs Department

The HMRC government office is understood to be in the process of setting up a separate online portal for operators to access the new Coronavirus Job Retention Scheme, which was announced on Friday 20^th March.

 The new scheme will be available to all businesses, large and small, to allow employers to retain PAYE employees on the books as salaried employees, even if they are currently furloughed or would otherwise be laid off.

 

https://www.gov.uk/government/organisations/hm-revenue-customs

A number of individual operators and larger companies have taken the bold decision to temporarily close their businesses, to protect both the health of their own employees as well as customers. Those who have chosen to remain open have implemented measures such as decreasing the number of tables to create more distance between customers or introducing take-away options.

 In a bid to curb the virus outbreak as it unfolds, Prime Minister Boris Johnson has urged the public to avoid unnecessary social contact and cease visits to pubs, bars and restaurants – but stopped short of ordering hospitality and entertainment venues to close for now. In addition, yesterday’s announcement that schools will close as of Friday 20^th March may impact some employees’ ability to work.

 Operators within the sector have said the unprecedented drops in visits experienced over the last few weeks and a halt in trading altogether could trigger thousands of job losses and closures. The industry faces an ‘existential crisis’ without urgent state help to mitigate the effects brought about by the efforts to slow the spread of the virus.

Amid these growing concerns, the government has announced a range of packages to help businesses through these difficult times.

 Measures unveiled by Chancellor Rishi Sunak on Wednesday 11^th March, as part of the Spring Budget 2020 include:

• A freeze in duties on beer, cider and wine as well as spirits
• Business rates will be temporarily abolished for eligible firms in the retail, leisure and hospitality sectors with a rateable value below £51,000
• A £3,000 cash grant will be available to firms that are eligible for the small business rate relief
• The introduction of a temporary Coronavirus Business Interruption Loan Scheme, offer loans of up to £5 million for small and medium-sized businesses through the British Business Bank
• Businesses with fewer than 250 staff will be refunded for sick pay payments due to coronavirus for two weeks
• Removing the minimum income floor in universal credit

 

Further measures announced to support the industry as the pandemic unfolds have so far included:

• Mortgage lenders offering a three-month payment holiday to those in need
• An extension of the business rate holiday announced in the Budget – now to be offered for the 2020 to 2021 tax year for all businesses.
• £330 billion fund for government backed business loans (equivalent of 15% of the UK’s GDP)
• A £25,000 grant for retail, hospitality and leisure businesses operating from smaller premises, with a rateable value between £15,000 and £51,000
• A £10,000 cash grant for smaller firms eligible for SBRR or rural rate relief

How will these measures offer support/bring relief to the sector?

 The freeze on duties and extension of the business rates holiday announced in the 2020 Budget will be welcomed by the sector as a whole, as this will alleviate some operational costs pressures for businesses of all sizes.

 Similarly, grant aid and business loan support will bring some much-needed relief to many businesses already facing challenging times, although there is some lack of clarity and detail at this stage on how and when operators will be able to access the benefits.

 At this stage, the government has focussed much of their initial support measures towards smaller businesses. Grant aids and the £330 billion fund for business loans will be a major focus for more successful operators of larger sites and corporate managed operators. We’re awaiting further clarity on how the government plans to roll-out the full range of measures, in order to evaluate what they mean for small and large businesses.

 

Are these measures enough?

 Current measures are welcome by operators, but they are focussed on supporting businesses and the industry has called for more aid and protection for employees and property. Equally, it is not yet entirely clear how all of these measures can be accessed, and with many operators already announcing closures and redundancies, speed of implementation is absolutely critical.

 The government is yet to announce measures which address some of the key issues regarding staff, who may be laid off or put on reduced hours, although the Bank of England has recommended against redundancies.

 Additionally, whilst the measures announced so far partly address fixed property costs through focussing on business rates, they do not directly deal with the issue of rent. This is a major concern, particularly for businesses that face short-term closure.  

 The Prime Minister yesterday announced that the government will bring forward emergency legislation to protect private renters from eviction and we can only hope further legislation will follow for businesses.  

 From our perspective, we welcome the lobbying of government by the key trade bodies such as UKH, BBPA and BII and we are currently working to assist these groups.

 Further clarification is needed as to how and when businesses can claim the range of benefits promising to safeguard them and the industry, and additional support is required for workers who fall sick or find themselves laid off or working reduced hours.

 In addition, there are strong calls to introduce a package to relieve businesses of the burden of rent payments whilst they face the possibility of temporary closure or limited trading.

 We share the concerns of the sector and will be closely monitoring further announcements from the government in the coming days and weeks. We have a large and experienced team who can help provide support and advice to all stakeholders seeking to navigate themselves through these difficult times.

Please get in touch if we can be of any support to your business at this time.

Stephen Owens FRICS MCIArb

Managing Director – Pubs & Restaurants

T  +44 (0) 113 389 2726

M  +44 (0) 796 800 4550

E  stephen.owens@christie.com