The UK government has been warned that, unless its provides support, the next rent payment deadline could see business “failures”.
The comments came as the OECD warned that the UK, with its focus on services, could be the hardest hit economy in the G20 this year.
The OECD said: “The failure to conclude a trade deal with the European Union by the end of 2020 or put in place alternative arrangements would have a strongly negative effect on trade and jobs.”
The OECD said that the UK economy could contract between 11.5% and 14% in 2020,
UK Hospitality said that a “stalemate” on rent, with the June quarterly rent day approaching, was the biggest threat to the recovery and future of hospitality. The trade body has written to the Chancellor of the Exchequer and the Secretaries of State at BEIS, DCMS and HCLG, warning that hospitality businesses would be unable to come to rent settlements without support.
UKHospitality CEO Kate Nicholls said: “The stalemate on rent, with the June quarterly rent day fast approaching, is the biggest threat to the recovery and future of hospitality.
“We are moving towards the reopening of the sector and many people, both in and out of hospitality, are keen to see businesses open again. Unfortunately, all the good work in keeping businesses afloat during lockdown and the best-laid plans for restarting, could be completely undone by the impasse on rents.
“As things stand, when 24th June comes around, many businesses will not be able to pay. We have lost an entire quarter’s revenues to Covid-19 and the prospects for trading from July to September look severely limited. Social distancing measures and expectations of low consumer confidence are going to see businesses trading at a fraction of capacity.
“The current moratorium on forfeiture and enforcement action must extended until the end of the year, to allow government’s proposed Code of Practice to support negotiations. The reality is, though, we are at a point where the government has to step in and act decisively, otherwise businesses will go under, jobs will be lost, and rent will never get paid.
“Fiscal support is now the only option if we want to avoid business failures. The government must consider supporting hospitality businesses who cannot pay rent. A continued stand-off does not help anyone.”
At Whitbread, where the company had been clear that it had been paying rent, the group reported the successful placing of its rights issue, which saw it raise £1bn, to help unlock “growth opportunities” in Germany.
The group’s most-recent update saw it comment that its UK hotels were ready to open when the government advised, but that its internal scenario assumed that hotels would be closed, or would have low levels of occupancy, until September.
Insight: Tuesday’s Hotel Optimisation event saw Barclays' Tim Helliwell comment: "So far distress is more on the edge than front and centre. That's not to say it isn't coming" and Hamilton Hotel Partners’ Frank Croston add: "Distress is being kicked down the road. Government schemes have offered survival hope but, as that unwinds, that's when the liquidity crunch will start to become a distress crunch".
So there may be trouble ahead. And where will it hit first? In the UK the need is growing for the government to come up with a clear opening plan. Nicholls commented: “Countries that had a clinical, clear and swift lifting of lock down, with certainty on opening dates, criteria for reopening and consumer stimulus to are seeing the quickest bounce back - ministers, please take note. Protracted uncertainty is devastating.”
The sector has been doubly confused this week as rumours suggested that pubs might open on 22nd June, only for that to be pulled back. In the meantime, rents loom and there is no revenue. This is no longer a case of “the strongest will survive”, but only a few will make it. While Whitbread has shored itself up, there are few others who can survive quarter after quarter with no revenue coming in and, as the farrago at Travelodge has shown, landlords are antsy.