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UK Govt support for pubs, bars and restaurants

Julian Jennings shares his thoughts regarding the Government's approach to support for hospitality in the run-up to another uncertain Christmas period.

Since late July, relatively free of restrictions, trade has been building gradually back towards pre-pandemic levels for most. This has been despite stubbornly high levels of daily new Covid cases, and related issues such as the “pingdemic” and wider staff shortages curbing trading capacity. Meanwhile the Government’s support packages built around furlough, CBIL’s, VAT and business rates discounts have been gradually unwinding.

Omicron then entered the scene in late November. By the second week of December infections were climbing and on 8th December the PM instigated “Plan B”, re-introducing working from home (WFH) and Covid passports for nightclubs and venues. Nightclubs in Wales will close from 27th December and in Scotland Nicola Sturgeon announced the return of social distancing and table service only for three weeks from 27th December, while capacities are to be limited for indoor and outdoor events.

The new guidance and spread of Omicron have dealt a huge blow to hospitality businesses at this crucial time of the year. City centre pubs have started to close until further notice, with Fullers to the fore, shutting 20 Central London sites.  This has led to a concerted chorus of calls from across the hospitality sector for renewed Govt support.

The scale of the crisis is stark. The Christmas period represents a key trading period when hospitality typically earns a quarter of its turnover for the full year. This year it was hoped that the festive season would help ignite a new “post-Covid” recovery for the trade, helping to shore up weakened balance sheets and repay rental debt. The reality has proved alarmingly different, and the Chancellor has been persuaded to make at least a first move in announcing new financial aid package. But is it enough?

Following the 8th December announcement, UK Hospitality (UKH) warned that the trade could lose 40% of its Christmas sales. Subsequent rising infections have caused that estimate to look optimistic in hindsight. Indeed, already by the second week in December, UKH was reporting sales down 13% (on 2019) and in central London this figure at hit 40%, with cancellation of corporate events and the return to WFH driving the fall – this is inevitably being played out in other city centres across the UK.

The latest Government assistance is centred upon additional grants of between £2,700 and £6,000 per premises (scaled according to Rateable Value). However, for a venue losing 50% of its December turnover, the impact on profit is immeasurably greater once factors such as wasted stock and staff hours are accounted for. The grants announced this week are therefore de-minimus, or in the words of one operator it “doesn’t touch the sides”.

Further help on statutory sick-pay will soften some of the blow to staff in light of cancelled shifts having tested positive for covid but there remains for many a chasm between what has been put forward and the scale of lost profits at corporate level. Meanwhile, for those paying quarterly rents, the next rent quarter day is upon us, and the sector faces a £1.2 billion rent bill.

In Scotland a £100m fund (Wales £60m) has been ring-fenced to support, principally, hospitality but it is not yet clear how this will be distributed.

So can a one-off £6,000 cash injection cure an ailing pub patient? The way the grants are structured are attractive in their simplicity, but are less generous to larger operations, as anything over £51,000 RV receives the same flat rate grant. If a fire-break lockdown was to follow, then further valuable New Year sessions will be lost, but perhaps the crumb of comfort is that January, increasingly a “dry” month for the sector, will be a well-timed break. Or maybe Rishi Sunak could have further gifts still to come?

With further restrictions almost inevitable, and rumours of a two-week “circuit breaker” straight after Boxing Day, and significant levels of rent debt in the trade still unresolved with landlords, a golden Christmas looks set to be a bleak midwinter for the trade unless Rishi can find another present by reaching deeper into Santa’s sack.

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Julian Jennings