With the UK hospitality industry facing £2.5 billion worth of rent debt due to the Covid-19 lockdowns, many restaurants, cafes and pubs are struggling to stay in business.
Although every business has been impacted by the pandemic, there is no denying that the hospitality industry is among one of the hardest hit.
The government’s ban on commercial evictions is due to end this summer. The immediate impact of this is that a staggering 332,000 hospitality jobs, which is approximately one sixth of the industry’s workforce, could be lost.
With hospitality businesses being unable to pay rent as a result of the lack of customers, many have found that even the easing of restrictions has not provided a solution due to regulations which limit trade.
In the long term, the impacts of the current rent debt crisis are unprecedented, although it is likely the hospitality industry will continue to perform on a reduced capacity.
Short Term vs. Long Term Solutions
While it is widely thought that the government will extend its current policies to the end of this year as an immediate solution to the rent debt crisis, this is unlikely to salvage businesses across the hospitality industry.
Even if the government does this, the sector could still face long term damage, with landlords prioritising property value over regular income.
A new lease arrangement with a reduced rental value could create a perceived reduction in the value of the property, which is a risk some landlords may not be willing to take when the ban on evictions is brought to an end.
In addition, a survey of UKHospitality members found 40% of businesses have been unable to reach a deal with their landlord on rent concessions.
As a result, it is likely that the hospitality industry will be affected long after the Covid-19 outbreak has been brought under control unless plans that look beyond the next few months are put into place to provide much needed support.
What’s Next?
So far, one of the most effective and all-encompassing solutions to the issue is a seven-step plan proposed by UKHospitality to help save the industry, with the organisation saying there will be “a bloodbath on our high streets and a much longer-term damaging impact on the UK economy” if the situation is not resolved.
The seven-point plan is urging the government to:
- Extend the debt enforcement and eviction ban period.
- Set an advisory level for rent forgiveness.
- Allow tenants to make a reasonable offer of rent debt payments.
- Introduce low-cost, government-backed property bonds.
- Introduce a break clause with a 50% reduction in rent debt.
- Conduct a reset rent review.
- Conduct a long-term commercial property review.
To truly revive the hospitality industry, the rent debt crisis should be addressed in a way that sets businesses up for success following the pandemic, both ensuring they can survive the current crisis and its related challenges such as the staffing shortage – as well as allowing businesses to recuperate in the long term.
It has been hard to watch so many of the businesses we love struggle over the last year, and at Stint we’re determined to help the industry get back on its feet again. With the current issues and the longer-term shifts that have happened over the past couple of years, it is time for the industry to embrace change. By integrating with Stint and operating in a new, better way, businesses can relieve the pressure caused by rent debt, the staffing crisis, and other challenges facing the industry.
