Tuesday 4 August 2020 8:33 am

'More than three-quarters' of UK hospitality firms could go bust within a year

More than three-quarters of UK hospitality businesses are at risk of insolvency within 12 months, the leading British trade body announced today, as social distancing measures and local lockdowns continue to weigh on the sector.

A new survey by UK Hospitality showed that one in five hospitality businesses are at significant risk of insolvency within a year, while more than half believe they face a slight risk of going bust in the next 12 months.

Read more: Pubs may have to shut to keep schools open, hints Number 10

Fewer than one-quarter of hospitality businesses surveyed by UK Hospitality, which represents more than 65,000 British venues, said they face no risk of insolvency within the next year.

The trade body warned that without further government support, businesses across the country will face financial ruin and plunge hundreds of thousands of jobs into uncertainty.

UK Hospitality urged the government to extend measures such as the business rates holiday and VAT cut announced by chancellor Rishi Sunak last month.

The trade body also called on Sunak to extend the furlough scheme beyond its October deadline for those businesses unable to open, and to offer further financial support on rent.

“Otherwise, we are going to see businesses fail and jobs lost just as the economy begins to reopen,” said UK Hospitality chief executive Kate Nicholls.

“The future of this sector, which provides jobs in every region of the country and is central to our social lives, has never looked shakier.”

Nicholls added that the government’s emergency support package has been “crucial” in helping businesses survive the pandemic.

However, she warned that without further support “we are going to see more and more venues going out of business and people continue to lose jobs.”

Third of pubs aren’t breaking even

It comes as the British Beer & Pub Association (BBPA), today said that over a third of pubs in the UK are still unable to break even one month after reopening.

A survey of more than 20,000 pubs represented by the BBPA found that 25 per cent of brewing and pub sector businesses said they were not confident their business was sustainable beyond the end of March 2021. 

The trade body echoed UK Hospitality’s calls for further government support, urging the chancellor to slash beer duty by a quarter and cut VAT on beer served in pubs.

It also called on the government to “fundamentally reform business rates to enable the beer and pub sector to fully recover and help grow the economy once more. “.

“We fully support the Eat Out To Help Out scheme and the temporary VAT cut to food and accommodation in pubs and hope they will help boost pub sales,” said BBPA chief executive Emma McClarkin.

“However, to ensure the full recovery of our sector… we need the government to increase its support.

“£1 in every £3 spent in a pub goes to the taxman and now is the time to reinvest that money in our brewers and pubs. That means cutting beer duty by 25 per cent, as well as making the VAT cut permanent and extending it to beer in pubs to bring the cost of a pint down and unlock investment.”

A Treasury spokesperson told City A.M: “Britain’s pubs and hospitality industry are vital to our economy, which is why we’ve worked tirelessly to ensure the they have the support they need, including through the furlough scheme, loans, business rates holidays and cash grants of up to £25,000.”

Read more: The City View: Glass half full? Emma McClarkin on the future of British pubs

“Following our Plan for Jobs the industry can also now benefit from a £1,000 job retention bonus for every staff member they bring back off furlough, and the Eat Out to Help Out scheme will help get more customers through their doors.”

The spokesperson added: “It is in no-one’s long term interests for the furlough scheme to continue forever and right that state support is slowly reduced as we focus on getting furloughed employees back to work.”

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