Coronavirus: UK pubs, hotels and restaurants could face ‘bloodbath’ after lockdown as third of industry at risk of closure

Waiters and other staff miss out on support because government scheme does not cover tips, committee hears

Britain’s pubs, hotels and restaurants could face a “bloodbath” as the coronavirus lockdown is lifted, with up to a third of the sector at risk of closing down, an industry body has warned MPs.

UKHospitality chief executive Kate Nicholls called for urgent action to defer rent payments that have built up during the outbreak and to extend the employee furlough scheme for premises which may be forced to continue social-distancing measures as late as Christmas, long after the rest of the country has left lockdown.

Ms Nicholls said that large numbers of hotel and restaurant staff are already missing out on furlough payments because income from tips and service charges is not included.

And she said as many as 500,000 have been excluded from the scheme because they had not received a payslip by the start of March in an industry where many jobs are seasonal.

Giving evidence to the House of Commons Treasury Committee’s inquiry into the economic impact of coronavirus, Ms Nicholls said: “It is undoubtedly the case that we are not going to be able to save every business and we are not going to be able to save every job in hospitality.”

The government must legislate urgently to allow unpaid rent to be deferred to the end of loans or leases, or businesses will face a “mountain of debt” when quarterly payments come due in June, she warned.

Pubs, bars, hotels and restaurants were the first to be affected by the lockdown and were likely to be the last out, with venue capacities restricted for months to come by the need to observe social-distancing measures such as separating out tables or imposing limits on numbers of drinkers, she told MPs.

“If we don’t get that intervention on rent and we are forced to remain closed until Christmas, I think you could put a third of the sector at risk,”

Ms Nicholls said that government grants for the hospitality sector during the Covid-19 crisis had failed to reach as many as two-thirds of businesses – including 10,000 pubs – because they operate from premises above the rateable value threshold of £51,000. She called on chancellor Rishi Sunak to ditch the cap, which she said would improve the sector’s chances “immeasurably”.

And she said that only 1 per cent of HospitalityUK members had been able to make successful claims on insurance policies covering forced closures or the inability to access premises – even when they had paid extra for policies including closure due to pandemics and notifiable diseases.

More than 70 per cent had seen claims turned down by insurance companies. Meanwhile, more than half (58 per cent) were still waiting for decisions from their banks on coronavirus business interruption loans (CBILs), as lenders insisted on applying viability and appropriateness tests on businesses which often make losses in their early years of operation. One or two banks were saying they “will not lend into the hospitality sector, full stop”, she said.

She welcomed Mr Sunak’s decision to move the deadline – from 28 February to 19 March – to qualify for furlough payments.

But she said the chancellor had added a requirement for participants to have received a payslip, which excluded 350,000 to 500,000 people.

And she said that the scheme covered only income that was contractually guaranteed, so workers in hotels and fine dining who receive as much 40-50 per cent of their pay from the “tronc” system of pooled tips or service charges were ending up receiving as little as 40 per cent of their normal earnings.

Many of these were lower-paid staff like waiters earning only £9 or £10 a hour in basic pay, who are able to boost that to £20 through tips in normal circumstances, she said.

Ms Nicholls warned that even an end to the lockdown will not ease the sector’s woes.

“With social-distancing restrictions in place, businesses are only going to be able to reopen at 30-50 per cent of normal revenues,” she said.

She called for the furlough scheme to be extended for businesses required to remain closed beyond June or those which can only open at reduced volumes and for continued access to government grants for the hospitality industry.

“Otherwise we will have done all this for nothing, because businesses won’t be able to stand up by themselves when we remove the support,” she warned.

After hearing Ms Nicholls’s evidence, committee member Rushanara Ali said: “There are still hundreds of thousands left who will not benefit from the extension to 19 March.

“That is a lot of lives, a lot of families, who are still not going to be supported and who need support urgently.”