Hospitality Sector Faces Double Whammy of Rent Debt and Staff Crunch 6
CLH Digital
Issue 61
Written by Kunal Sawhney, CEO, Kalkine Group (www.kalkine.co.uk)
UK’s hospitality sector is struggling to deal with the double whammy of staff crunch and rent debts. Perhaps the worsthit sector by the economic fallout of the Covid-19 pandemic, the easing of restrictions around indoor dining does not seem to be helping much. Heads from the retail, travel and hospitality sectors have said job losses and business failures that are staring at the sectors would not be addressed only through easing measures as they are reeling under extreme pending debt which got piled up during the pandemic. As per some estimates, hospitality and retail businesses have a combined built-up rent debt of £5 billion. The moratorium placed on demand for commercial rent arrears would be expiring on 1 July.
WHAT HAS BEEN DONE SO FAR? The government’s moratorium had provided some respite to several tenants. It was introduced last year as a safeguard measure to help businesses ride out the Covid crisis and was extended at several points. It got an extension up to March 2021, then Robert Jenrick, housing secretary, announced that the moratorium has been extended for another three months, till 30 June. The government is expected to come up with a set of announcements
this week that the hospitality industry is looking towards with much anticipation as they would directly impact the sector’s road to recovery. Several leisure companies have said that they required more handholding as last year situation depleted cash reserves and increased debts. Though the government has eased rules for the reopening of wine bars and restaurants, reduced capacity is making it difficult to cover costs. Kate Nicholls of UK Hospitality has warned that the majority of the members of the trade body, who together run as many as 90,000 venues, fear back-dated demands of rent right after the moratorium ends despite many not being able to trade yet. Nicholls said any delay in reopening of business, as is being suggested by some scientists, would have a devastating impact on the hospitality sector that is already fragile, pushing many businesses towards failure and resulting in more job losses.
WHAT NEEDS MORE ATTENTION? One in four venues of hospitality businesses are still closed because of restriction norms, and those that are trading are following significantly reduced capacity norms. They are just delivering 63 per cent of the revenues seen during pre-Covid levels. Each passing month of business in reduced capacities bring down revenues by an additional £3 billion. Not only this, the industry is also staring at a staff crunch and has warned that the sector might see job losses up to 500,000 once the government’s furlough scheme ends. The number highlights the strain on businesses as a major part of the economy remained shut for more than a year. While it was earlier planned those remaining restrictions would all be eased on 21 June, the virulent Delta variant of the virus has forced the government to rethink full reopening. Travel trade body ABTA’s CEO Mark Tanzer, has pointed out that not just the hospitality sector but the travel industry too would require grant support to survive. He said France and Netherlands have come up with schemes that topped up revenues by even 100 per cent. He said UK’s travel industry was worse off as it is still impossible for tourism
business to resume after Portugal was removed suddenly from the safe travel destinations list.
WHAT’S THE NEED OF THE HOUR? The Confederation of British Industry had said that businesses that were hit the hardest should continue to be given protection for six more months, and companies that show lockdown-related fall in revenue of over 30 per cent in 2021 should be given additional protection. It has also been asked that unpaid debts in commercial rent accrued during the lockdown should be separately negotiated by the landlords and tenants with the time-bound extension of protections that would help both parties to reach an agreement. In Northern Ireland and Wales, rent moratoria is also set to end this month. Scotland provides the protection till September. For the UK government to protect its businesses, it has to come up with schemes that provide more handholding. Though the vaccination drive in the UK has been successful, new variants make things uncertain in the immediate future. To safeguard businesses from collapsing, especially the hospitality sector, government’s handholding is the need of the hour.
British Hospitality Workers Falling Behind with Pay Rises, New Report The data shows salaries have risen by 20% for fulltime workers in the UK since 2000, compared to 35% for Ireland. Despite having the 7th highest real minimum wage at £7.56*, the UK is behind in rankings as neighbouring countries improve their salary offerings at a faster rate. Latvian employees were found to have the largest annual salary increase, with salaries rising by 148% according to the most recent figures available. Workers in Lithuania have also experienced a high rise at 144%, with those in Estonia also seeing a rise of over 100% in average annual salary (138%). The full results can be found below:
Country
The UK is falling behind with annual average salary increases for hospitality and events workers, according to new research which analysed the pay rates for countries over the past two decades. Hospitality has been one of the most severely hit industries over the course of the pandemic, with pubs and restaurants being forced to close, as well as events and flights abroad being cancelled. Covid-19 has brought about a period of great uncertainty, after a series of lockdowns and tier systems in the UK and research from software provider Mitrefinch, found the UK ranks in 20th place for annual salary increases, behind Ireland, France and the US.
Latvia Lithuania Estonia Czech Republic Slovak Republic Hungary Poland Chile Korea Norway Slovenia Sweden Ireland New Zealand
Rise in average salary 147.91% 143.65% 137.91% 73.91% 65.51% 55.93% 52.94% 49.99% 44.41% 43.64% 41.48% 35.41% 34.51% 33.94%
Iceland 33.27% Denmark 25.51% France 21.43% United States 20.49% Canada 20.42% United Kingdom 20.37% Finland 19.12% Germany 18.38% Australia 17.86% Luxembourg 16.68% Switzerland 15.07% Austria 11.60% Israel 10.23% Netherlands 9.91% Belgium 8.82% Mexico 5.09% Italy 3.11% Spain 2.17% Japan 1.49% Greece -2.48% Portugal -3.20% Commenting on the figures, Julie Lock, Commercial Director at Mitrefinch said: “The pandemic has amplified any existing financial concerns for hospitality employees across the UK, with many being furloughed during lockdown or losing work altogether as events were called off, venues were closed. Whilst pubs and restaurants have been opened to the public - they have also been shut
again on repeat, leaving many businesses extremely vulnerable. As the lockdown eased, staff in hospitality returned back to work again to continue doing what they love most, and they deserve to be recognised for their resilience and hard work over the past year. “The data shows us that the increase of both this rate and annual average salaries for full-time employees has been slow in comparison to neighbouring countries, which is disappointing for hospitality workers who have faced an extremely tough year in their industry.” Jayne Harrison, Head of Employment Law at Richard Nelson LLP commented: “The data shows average annual salaries in the UK are rising at a slower rate than many neighbouring countries. This is frustrating for hospitality and events employees as they have continued to adapt to government guidelines and have faced unsettling job worries and financial stresses. “After being hit by the pandemic, hospitality and events employees across the UK are looking to be supported financially by their employers as the economy begins to recover. These workers have played a critical role in getting the nation moving again, and we are expecting to see more of a push back on this over the next year.” For the full results of this research, visit: https://www.mitrefinch.co.uk/blog/mitrefinchnews/salary-increases-uk-vs-row/
