Financial Matters

With David Frederick FCCA | Marcus Bishop Associates | marcus-bishop.com

Will it be 3 cheers or 3Rs post COVID-19?

Traditionally July is the month when the long summer school holidays begin. However, this year it marks the 3Rs (Re-opening, Resumption, Resurrection) for the hospitality sector which includes; pubs, bars, cafes and restaurants. This is all subject to adherence and the introduction of effective social distancing. It will definitely, not be business as usual for business owners who are eager to have the lifeblood of cash flowing through the veins of their business. Similarly, some consumers and householders, may or may not be ready or at worse reluctant to venture to familiar haunts of past behaviour. However the reluctance to participate in the 3Rs may be somewhat influenced by some of the economic signals from the different parts of the economy. In short, the availability of disposable income following changes that households have undergone in the past 3 months. On one hand there has been the working as usual camp. However at the other end of the spectrum has been the furloughed and even worse are those who are now unemployed as their employers had to close their doors! An insight to some of the household challenges and pain can be gained from a look at the mortgage market (also the rented sector). On 17th March mortgage lenders announced mortgage holiday periods to support borrowers affected by COVID-19. Within one month, some 1.2 million borrowers had been granted a mortgage holiday by their lenders. This was compounded in May with a 25% increase in the number of customers who had been granted a payment freeze on their credit cards; and in the same period there was a 30% increase in borrowers who were granted a payment holiday on their personal loans. One local who may not be tempted back immediately is Maria, a married mother of three children, who was not only furloughed but had been ill during the last three months. Their household was solely reliant on her husband’s income. Maria credits their survival to the local support that the family received. “A local crowd funding programme provided the children with a cooked meal one day each week, so that really helped. We also received donations from Morrison’s. Without these aids it would have definitely been more difficult.” Unlike Maria a local entrepreneur, Sue whose business had to shut its doors and furlough over 25 staff members had to raid her savings. “I had savings and if lock down depended upon savings that would have been fine. However I had to use it to fund the business as the company was unable to get any external support, so the savings dwindled.“ Hospitality business owners, including pubs, bars, cafes and restaurants can take some joy from some households keen to unleash their pent up disposable income accumulated over the past 3 months. As a result of workers enforced working from home, there has not been that opportunity to spend, spend, and spend. Savings have arisen not only from the absence of travel to work but also frivolous or leisure spending. This was echoed in a conversation with Lawrence a local business owner who transitioned to work from home. “Businesses like ours will have noticed an eye watering reduction in travel and marketing expenses associated with ‘pre-covid’ activities such client and prospect meetings, attending networking and events, etc.” Lawrence’s experience seem to support and endorse the findings of research by finder.com. “Brits are each saving an average of £54.67 per week on leisure activities and a further £44.78 per week by working from home.” Hopefully as our hospitality sector undergoes the 3Rs of re-open, resumption and resurrection, and cash begins to flow through its veins, this will soon wash away some of the pain of the past 3 months!