A letter from the catering equipment industry should have landed on Boris Johnson’s desk this week.
Signed and sent by trade associations FEA and Ceda, it painted a stark picture of a landscape that will be left with multiple business casualties and enormous skills gaps if it is not granted more support.
Both FEA and Ceda have carried out some tremendous work since the Covid-19 pandemic took hold, providing a valuable stream of resources and information to help members make decisions in an environment that is new to everyone.
But nothing they do could end up being more important than their bid to get the catering equipment sector’s voice heard.
I have always wondered whether letters to the prime minister really ever do reach their intended recipient – it is, after all, a symbolic gesture used by many industries over the years to raise awareness of significant issues they face with those at the heart of power. I’m told the main thing is it reaches the eyes and ears that matter; those who can at least influence the inner circle.
This is an occasion when the contents of that letter have never been more meaningful. For the sake of the catering equipment sector’s future, it is vital that action is taken.
What I took from that letter – which you can read in its entirety here – is that the catering equipment sector is in grave danger of becoming the forgotten man of the hospitality industry.
Restaurant and foodservice operators are having a grim time of things, but so too are catering suppliers.
FEA and Ceda estimate that sales volumes have declined by more than 90% since the pandemic struck. It’s a frightening figure, but one that demonstrates just how intrinsically linked the sector is to the wider hospitality trade.
Boris Johnson has directly referenced the crippling economic hardship facing the hospitality sector the longer this goes on. But he is referring to those on the consumer-facing side of the fence, not the supply chain that props it up from behind.
Yet without the infrastructure and support that allows operators to produce food items at scale and deliver the most creative menus, there is no hospitality sector.
It is no secret that when the lights do go back on, things aren’t just going to revert back to normal right away. Social distancing measures of some description are likely to remain in force, which will restrict the amount of traffic allowed into restaurants. That in turn will impact the amount of revenue that operators can make and their short-term appetite to spend on new projects and technology.
That’s why I wholeheartedly support FEA and Ceda’s argument that catering equipment companies should be allowed access to the same support as operators.
The most important line of their letter is the one that calls for “total alignment between our sector and the hospitality operator sector”.
Achieving that means an immediate extension to the furlough scheme for the foodservice equipment supply chain in line with any parallel development for operators, as well as eligibility for the same level of business rate support. It also includes the introduction of a business rate reduction relief scheme for the foodservice equipment value chain where there is not substantive business activity or output.
Then there is the most emotive subject of them all at the moment: payment.
Worrying about where the next bit of business is going to come from is one thing; contending with payment delays for work already completed is quite another.
Yes, trading relationships are going to be tested like never before in this climate – suppliers will be asked to show far greater flexibility and empathy than ever before – but goodwill can only extend so far and I have spoken to numerous companies who feel customers have been acting unfairly.
FEA and Ceda cite examples of operators proposing non-payment of bills until they are reopen for business, and then seeking extensions to 120-day or even nine-month credit terms. Even cash-rich businesses would struggle to deal with those kind of arrangements.
They argue that it is unreasonable for the operator sector to be able to call on support for business rates and employment costs while withholding payments to suppliers.
It is hard to disagree with that, even if operators might have their own order of priorities when it comes to who they pay first.
So what’s the solution?
FEA and Ceda want the government to make it conditional for operators receiving furlough or business rate support to pay their suppliers to terms. They propose that any business without the cash to pay trade creditors as a result of Covid-19 should apply for a Business Interruption Loan and settle their obligations.
If a business is ineligible for the loan they should provide a certificate from their bank and accountant confirming this to all creditors who can use this to claim interest on overdue monies which the government can in turn claim back from the debtor via the VAT or Corporation Tax system.
To speed up access to the CBILs, they should be 100% government backed but only made available to businesses that can demonstrate they were viable had Covid-19 not occurred and show capability to make repayments.
These are not unreasonable requests. Catering equipment companies want their customers to survive this period – of course they do – but they also fear becoming so squeezed themselves that they aren’t there to service them when this is all over.
Business failures will result in further market disruption and lead to skills and service gaps that will take more time and money to plug.
The sensible solution is to effectively sustain the skills and services that have taken years to build up already, rather than leave the correction to happen naturally like it would in normal market conditions.
If there are mechanisms for this to be allowed to happen, the infrastructure support and industry-specific skills that operators rely upon to grow and expand will still be there when they really come to need it again.