The £4.6 billion ‘softener’ that Chancellor Rishi Sunak announced for the hospitality and leisure sector just a day after Boris Johnson plunged the country into lockdown this week sounds like an enormous sum. But my immediate reaction to the news was that it’s just a drop in the ocean.
Hospitality bosses were quick to express similar sentiments. With grants of between £4,000 and £9,000 per site available to operators depending on the rateable values of the properties concerned, it doesn’t take too much math to work out that the handouts a lot of operators are in line to receive won’t make much of a dent into their costs.
JD Wetherspoon said its cash burn during the November lockdown was £14m. Even if all its 900 pubs were entitled to the full £9,000 grant per site, the figure would still only equate to just over £8m. Mitchells & Butlers expects to burn through £35m to £40m a month with all its sites closed.
Oakman Inns, which would be eligible for £250,000, said it would rather forsake the cash if the government would agree to use its 28 sites as vaccination centres and speed up the roll-out. There are obvious practicality issues with this, but its point is that there is far more to gain from getting the industry open as quickly as possible again than a one-off cheque that will only have a short-term impact.
Ultimately, such grants aren’t even going to cover the costs of being closed let alone secure the financial viability of most hospitality operators.
For larger multi-site players, especially, rental negotiations with landlords, the ability to raise new forms of equity and the strength of relationships with lenders will continue to have the greatest bearing on success and failure.
Hospitality operators are not going to turn down any help they are offered, and trade body UKHospitality said Sunak’s offer was “most welcome” in the immediate term.
But the fact that in the same sentence it described it as nothing more than a “sticking plaster for immediate ills” tells you all you need to know.
Most parts of the hospitality industry have been made to feel like scapegoats throughout this pandemic, especially as they have watched other parts of the economy be allowed to reopen again.
News of the vaccine roll-out at least provides operators with the hope that the current lockdown is the last big compromise they have to make, but what the industry really needs from Rishi Sunak is the courage to get on and announce the changes that will give it the certainty that a powerful and dynamic recovery is possible.
Business rates holidays need to be extended for the rest of the year at least – a move that would provide operators with a significant saving at a time when many are already grappling with arrears.
A VAT cut also needs to be imposed as a minimum requirement. These are things that will at least strengthen the industry’s financial resolve when the doors to pubs and restaurants can open again.
Oakman Inns’ founder Peter-Borg Neal tweeted some other ideas this week in response to Sunak’s announcement – all of which will go far further than one-off grants are able to.
This includes confirmation that the Coronavirus Job Retention Bonus will be reinstated or replaced. As he points out, this money was promised from the dispatch box and businesses have it in their cash flow forecasts.
He also suggests hospitality businesses should be allowed to use their corporation tax losses incurred during the pandemic to offset other tax liabilities including VAT and PAYE. The argument here is that his will eventually be self-funding.
I am sure the calls for the Chancellor to bring forward his budget and make the announcements the industry really wants to hear to plan its survival will only grow louder. Businesses need a longer-term economic roadmap.
Handouts from Rishi’s magic moneypot will only have a limited effect. More meaningful measures that recognise medium and long-term challenges are what will make the real difference.