Business Failures Expected to Rise in Hospitality Sector

MPs have been told that the hospitality sector could see a notable rise in insolvency cases in the coming months unless more financial support and protections can be provided to them.

Kate Nicholls from the trade body UKHospitality explained to members of parliament this week that many businesses in her sector are under huge financial strain primarily because of the debt they’ve accumulated over the course of the pandemic.

Estimates suggest that the UK’s pubs, bars, restaurants and hotels have collectively racked up close to £10 billion in debt since the pandemic began.

Around £2 billion worth of commercial rent is understood to be outstanding across the hospitality sector and around £6 billion worth of government-backed loans are known to have been distributed to businesses in the industry.

Access to debt and the protection of commercial property eviction bans have helped to ensure that relatively few hospitality operators have been forced out of business in recent quarters but concerns are growing that the sector may soon see a wave of insolvencies.

“We have managed to keep bankruptcies and business failure to a relatively low level but I do think we will see that picking up,” Ms Nicholls told MPs.

The UKHospitality chief executive called for government to extend support to operators in her sector through measures such as business rates relief and the maintenance of the furlough scheme that has saved many thousands of jobs in recent months but is soon set to be wound down.

Representatives of nightclub operators and the night-time industries sector have raised concerns about a potential lack of clarity over the rules and restrictions they’ll need to adhere to once they’re allowed to reopen again from July 19.

Helen Dickinson, the chief executive of the British Retail Consortium (BRC), raised similar concerns about what policies retailers will be expected to implement in relation to issues such as mask-wearing, vaccination status monitoring and ‘track and trace’ as the economy continues to reopen.

“We are awaiting the detailed guidance and it is vital the government is as clear as possible as to how they expect people to act after 19 July,” Ms Dickinson told MPs.

A lack of rules around social distancing is expected to be positive for hospitality firms and retailers as they look to boost their revenues and customer numbers in the coming weeks but businesses in both sectors clearly still face significant challenges in coping with the realities and implications of the Covid-19 crisis.