Fears are mounting of a commercial ‘bloodbath’ when hospitality businesses, currently shut through lockdown, face the wrath of their landlords when the next rent is due. Some respite has come in the shape of temporary protection from the government from aggressive landlords, a move welcomed by the industry, but what happens after the 90 days shield is taken down? It’s a long term question that will need a solution says UKHospitality.
Trade body UKHospitality has welcomed the announcement of measures to protect commercial tenants including businesses that are currently closed and have no revenue to fund rent payments to landlords. The government confirmed new measures to prevent aggressive rent collection in the wider commercial sector. The measures will temporarily ban the use of statutory demands and winding up orders where the non-payment is due to Covid-19. The government is also laying secondary legislation to provide tenants with more breathing space to pay rent by preventing landlords using Commercial Rent Arrears Recovery (CRAR) unless they are owed 90 days of unpaid rent.
UKH chief executive Kate Nicholls said: “This is a very helpful and pragmatic response from the secretary of state and will give hospitality businesses some very valuable breathing room. UKH has pushed the government to provide extra protection for businesses, so it is good to see positive action. Many businesses in our sector have no revenue whatsoever coming in, so paying rents has been out of the question for a significant number. This is likely to be the case for the rest of the year and further government action is required to address this for the next nine months.
“This extra space will allow businesses to survive and to find a way to work with landlords. If social distancing measures are to be in place for some time, as we now believe they will, this measure must be extended to ensure that businesses can survive. A cancellation of existing sanctions is also very welcome.
“The majority of landlords have understood the challenges the sector has faced, but these measures were much needed to curb the aggressive behaviour of others which, if left unchecked, threaten hundreds of thousands of jobs.”
Government action followed Nicholls’ ‘virtual’ appearance in front of the House of Commons Treasury Committee when she gave evidence to the inquiry into the economic impact of coronavirus.The UKH chief warned of a ‘bloodbath’ with up to a third of the sector at risk of closing down unless the government intervened across the key stress points identified as Job Retention, Rents, Loans and Grants and Insurance. She urged the government to legislate urgently to allow unpaid rent to be deferred to the end of loans or leases, or businesses will face a “mountain of debt” when quarterly payments are due in June.
Nicholls highlighted those areas where government support was not having the intended effect with many businesses struggling to access support with others excluded from schemes. She also stressed the need for business support to continue past the end of the lockdown if the hospitality sector is to fully recover. Nicholls commented: “Government support for businesses has been swift and it has helped many businesses get over the initial shock of the crisis. It is clear, however, that too many businesses are struggling to access support and that the schemes in place must be extended and enhanced. Hospitality was the first sector to be hit hard by the crisis and it will be one of the last to make a recovery. Even when lockdown measures are lifted, our sector faces a huge challenge in getting customers back through their doors and finding solutions to social distancing measures that are likely to be in place.
“Business support needs to be boosted immediately to make sure that every business that needs it can access it. Scrapping thresholds for grants and support with rents will keep businesses alive and keep jobs open. This support then needs to be carried over after the worst of the crisis has passed. If it is abruptly switched off, then all the good work that has been done during these difficult weeks will be undone. Hospitality is going to be battling with the effects of this for months, if not years and support from the government cannot be stopped until businesses are back up to full strength.”
RESEARCH CONDUCTED BY UKHOSPITALITY
• Despite an extension to the Coronavirus Job Retention Scheme, an estimated 350,000-500,000 hospitality workers are missing out as they are seasonal workers or hit by technicalities, including new starters and those unable to produce a payslip
• 50 percent of businesses had applied for a loan but only 18 percent of those that had applied had secured one, with 58 percent of applicants still waiting for a response
• Some banks have indicated they will not lend to hospitality businesses
• 71 percent of hospitality business is carried out in a venue with a rateable value of above 51,000 and therefore ineligible for a grant
• Only 1 per cent of UKHospitality members had been able to make successful claims on insurance policies covering forced closures or the inability to access premises – even when they had paid extra for policies including closure due to pandemics and notifiable diseases.