Does Government need to extend support as lockdown continues?

Postponing the end of lockdown until Monday 19 July, although not entirely unexpected, will have a huge impact on the hospitality and events industries.  Here we assess some of the implications.

The UK Weddings Taskforce say that 50,000 weddings which were planned from 21 June have been cancelled, an estimated weekly loss of £325m for the industry. However, weddings are one of the few events which will see some restriction easing. There will be no ‘numerical limit’ on weddings and other ceremonies other than venue capacity, after Covid-secure controls have been implemented. Additionally, guests must stay two metres apart and there is a ban on singing and dancing.

Here is what the new rules will look like after June 21:

  • Social distancing remains in place until at least 19 July.
  • Groups of up to 30 can meet outdoors, with weddings and funerals now allowed, but with certain restrictions, as outlined above.
  • Care home residents will no longer need to isolate after spending time away, but will need to isolate for 14 days after hospital visits.
  • The ‘rule of six’ or two households remains for indoor gatherings.
  • Work from home advice remains in place.
  • Masks in indoor venues and public transport remains in place.

Given the sudden delay to lockdown easing, what steps should affected businesses be taking?

Business rates and furlough help should be extended

Chris Maloney, partner and hospitality and leisure sector specialist, Menzies LLP

The Government has gone above and beyond to support businesses during the pandemic but the latest announcement will have left many – in particular, hospitality businesses – reeling.

The Government urgently needs to extend financial support. This includes extending the full business rates holiday and the existing furlough scheme, providing businesses with a lifeline at what would be one of their busiest times of the year.

With relief from both schemes partially drying up at the end of June, business owners must be aware that there is likely to be additional cash outflow come the first of July.

Next steps: More than ever, it is vital that hospitality and leisure businesses consider their cashflow management and undertake effective scenario planning, to support them through what is hoped will be the final stretch until restrictions are lifted.

Verdict: Businesses should make use of scenario planning to help mitigate cashflow issues particularly as additional cash outflow will occur in July.

Separate government support from business performance to obtain an accurate financial picture

Phil Mills, head of food & drink, Old Mill

Noise about the delay began some time in advance and there are actually a few positives. Critically, the government changed the rules regarding weddings and though social distancing restrictions remain, this tweak could prove critical for businesses reliant on such events for income.

Many businesses have seen demand and revenues surge. Lots of our restaurant clients have seen their turnover rise by 50% or more compared to pre covid levels, so the challenge has been managing the supply chain and staffing.

The priority then is to work with your team to understand how they are feeling, what they need and to offer your support.

Next steps: Keep understanding your financial position. It’s amazing how many businesses cite a good year over the past twelve months but struggle to understand underlying performance vs government aided results. To ensure future success, understand what is working and what isn’t is critical.

Verdict: Get an accurate picture of underlying performance but don’t be clouded by government aided results. 

Prudent approach to cash forecasting will be critical for survival

Will Wright, head of restructuring, Interpath Advisory

The four-week delay to the easing of lockdown restrictions is, without doubt, another blow for businesses across the leisure and hospitality sectors. However, there may be gains to be made for those operators who remain nimble to shifts in consumer behaviours including offering takeaway or dine-in meal kit options.

Yet an increase in VAT rates to 12.5% is imminent as well as the repayment of rent arrears and CBILS loans as further cash outflows and businesses need to be aware of this.

Next steps:  Monitoring trade over the summer and taking a prudent approach to cash forecasting is going to be critical to help manage liquidity requirements and take necessary early action.

Verdict: Take a prudent approach to cash forecasting to navigate next few months.

Keep lines of communications open with creditors, accountants and landlords

John Bell, founder and director, Clarke Bell, licensed insolvency practitioners

Thousands of business owners in the hospitality and events sectors have been gearing up to open their doors fully on 21st June – ordering the necessary supplies and hiring staff for the expected increase in customers. This delay, albeit a necessary one by the government based on scientific evidence, is going to put an even greater strain on businesses and their owners, both emotionally and financially. With no extensions to the government support packages, a lot of them will now have had as much as they can take and afford.

Business owners will now be looking to 19th July as the date they can open up fully – but they must bear in mind that this could be delayed again.

Next steps: I would advise businesses to keep talking to their creditors – including their landlord – and their accountants to discuss their options.  If a company has run out of money and is finding it difficult to repay any loans, such as the Bounce Back Loan, it would be advisable to talk to an insolvency practitioner to discuss the best way forward.

Verdict: Keep talking to creditors, landlords and accountants to discuss available options.

Annie Makoff is a freelance journalist and editor.

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