The coronavirus (COVID-19) pandemic is having both a profound and very direct impact on the UK hospitality industry. Here Brendan Moffett, Director of the University of Derby’s Centre for Contemporary Hospitality and Tourism discusses how the latest guidelines issued by the government are affecting businesses in the sector and what support is being made available to support them through the crisis.
Government announcements surrounding additional ‘lockdowns’ are intensifying the situation, with travel restrictions now adding to limits on large gatherings. These measures have led to the confirmation announcement of full closures from some of the larger operators such as McDonald’s and Greggs.
Further, all McDonald’s restaurants in the UK have closed indefinitely. Previously, the chain had closed its seating areas but still offered takeaway and drive-thru services. However, in a further statement, a company spokesperson said: “This is not a decision we are taking lightly, but one made with the wellbeing and safety of our employees in mind as well as the best interests of our customers. We will work with local community groups to responsibly distribute food and drink from our restaurants in the coming days.”
UK hotel operator, Whitbread has said it would immediately shut all its Premier Inn hotels and branded restaurants such as Bar + Block Steakhouses. A significant number of its site teams have been placed on a temporary furlough, with all employees on full pay, Whitbread said, adding the recently announced government package was expected to pay up to 80% of their salaries.
A number of independent restaurants, as well as larger groups, also face uncertainty around their tenancies if landlords do not show a willingness to negotiate and allow them time to hold on during the COVID-19 pandemic. Many operators are currently insolvent and need to pay staff and suppliers. Looming quarterly rents will lead to a further ‘staff vs landlords’ dilemma.
Diversifying to Deliver
It is certainly an incredibly difficult time for bars and restaurants as the inevitability of further government restrictions roll out across the country. A number of restaurants and food chains are changing from sit-in facilities to home delivery. They are hoping that this shift in strategy to become ‘virtual restaurants’ can help them stay afloat as the spread of COVID-19 becomes more serious. One helpful factor is that their workers are still classified as ‘key workers’ by the government as they are involved in food production, distribution, sale and delivery.
Leon, the fast food restaurant company, is to turn its 65 UK restaurants into shops, selling meals via both click-and-collect and delivery. Meals that are currently served in boxes in-store will be placed in ready meal-type plastic pouches which are refrigerated and can be heated, stored or frozen at home. Smaller localised, entrepreneurial restaurants are ramping up their social media promotion or further utilising food delivery platforms such as Just Eat, Deliveroo and Uber Eats.
However, many ‘gig economy’ workers are saying that the delivery business has not increased as expected because consumers’ behaviour has changed with the outbreak. Many are opting to cook their own food, while delivery competition is fierce.
Financial Support and Guidance for Businesses
Despite initial annoyance from the sector after the government told the public to stay away from bars and restaurants before any support was in place, the situation has improved. The government responded swiftly to criticism with emergency business support measures. Among these measures introduced were a number specifically aimed at the hospitality sector.
Headlines include a 12-month business rates holiday and small business grant funding of £10,000 for all business in receipt of small business rate relief or rural rate relief, which may be relevant to many businesses in the Peak District.
Additional grant funding of £10,000 is also available for hospitality businesses with a property rateable value under £15,000. For businesses with a rateable value between £15,000 and £51,000 this grant rises to £25,000.
Perhaps more immediately significant for the sector however is the ‘job retention’ scheme where workers can be ‘furloughed’. Furloughed workers are those whose employers cannot cover staff costs due to coronavirus, and as such they have been asked to stop working, but have not been made redundant. Chancellor Rishi Sunak announced that the government will cover 80% of salaries – up to £2,500 per month – with all employers able to apply to HMRC to pay the wages of people who are furloughed. This scheme is expected to be operational by April via PAYE.
We are certainly in unprecedented times. Hopefully, a range of these government measures, combined with the undoubted entrepreneurial spirit and resilience of the sector, will help to protect the £130 billion per annum it contributes to the UK economy and retain its position as the country’s third largest employer.