Opinion: Eat out to save jobs

In the UK, we love eating out and will gladly take up the Government’s offer of 50 per cent off at our favourite establishments this month. What is only just becoming clear is the scale of the crisis facing the hospitality industry and how necessary the Eat Out to Help Out scheme, and many others like it, will be for preventing total collapse. Richard Dawson investigates

If you, like me, started your week off by making the most of heavily discounted food as part of the Government’s Eat Out to Help Out scheme, what you probably weren’t thinking about when tucking into your carbonara or tikka masala is just how vulnerable many of our favourite restaurants, pubs and cafes are to bankruptcy.

A new survey by industry trade body UK Hospitality has found that more than three-quarters of hospitality businesses are at some risk of insolvency in the next 12 months.

One in five respondents said they were at significant risk or expected insolvency within a year. More than half believe there is some risk to their business, whereas less than a quarter are facing no risk at all.

In a sector which, prior to the coronavirus pandemic, employed more than 3 million people in every part of the UK, these findings are deeply worrying.

Even if the rate of business failure in the hospitality sector was one in ten (this survey suggests something closer to one in five), then many hundreds of thousands of jobs could be lost.

Recent company announcements have reinforced this stark reality.

Looking at the period since hospitality operators were allowed to reopen on July 4 alone, it is clear that many thousands of jobs have already been lost.

Sandwich chain Pret A Manger confirmed the closure of 30 of its sites on July 6, after sales plummeted 74 per cent year-on-year. It is thought that at least 1000 jobs are at risk.

On July 9, the CEO of Burger King said the fast food chain is considering closing 10 per cent of its UK estate, affecting as many as 1600 jobs.

The Azzurri Group, which owns and operates casual dining brands Zizzi, Ask Italian and Coco di Mama, announced plans to close 75 restaurants at a loss of 1000 jobs as part of a pre-pack administration deal. That was on July 20.

On July 30, it was revealed that Pizza Hut is considering a credit voluntary agreement (CVA), which would put many jobs at risk and this Monday (August 3), burger chain Byron finalised a pre-pack deal that will see the closure of 31 outlets and 651 staff redundancies.

Meanwhile on Tuesday (August 4), Pizza Express agreed a restructuring arrangement to close around 15 per cent of its UK estate, affecting more than 1000 jobs.

These are only some of the major announcements that have come through in the month since the hospitality sector actually re-opened.

What they show is just how catastrophic the lockdown has been for hospitality businesses.

Another piece of research by UK Hospitality found that lockdown had cost the sector nearly £30 billion in lost revenues, with sales declining by 87 per cent in the second quarter when compared to last year.

The sector made just £4.6 billion between April and June, compared to £34.2 billion in the same period of 2019.

Even making use of the Coronavirus Job Retention Scheme (CJRS) and other Government support packages, including those tailored to the industry, this near total loss of income would make it impossible for any sector to sustain its present size.

It’s therefore no surprise that the scale of the job losses is shaping up to be so severe.

It’s also in this context that you begin to realise just how important the Eat Out to Help Out scheme is.

Not only have hospitality businesses had to endure three months with almost no income, they are now reopening in an environment where demand is continuing to be affected by consumer’s fears over the prevalence of the virus and insecurities about their own livelihoods as well as the logistical challenge of having to operate at reduced capacity to support social distancing.

In light of this, it’s clear that the Government must do everything it can to restore confidence and stimulate demand and indeed that is what industry bosses are calling for.

UK Hospitality chief executive Kate Nicholls says: “This is a truly desperate position to be in.

“The future of this sector, which provides jobs in every region of the country and is central to our social lives, has never looked shakier.

“The support the Government has provided has been crucial in ensuring that many businesses have survived the initial shock of lockdown and stimulated a return of some demand.

“Without further support, however, we are going to see more and more venues going out of business and people continue to lose jobs.

“This means we need to see an extension of the business rates holiday and VAT cut, employment support for those businesses unable to open and financial support on rent.

“Otherwise, we are going to see businesses fail and jobs lost just as the economy begins to reopen.”