Hospitality warns businesses won't survive when government support ends

01 July 2021 by
Hospitality warns businesses won't survive when government support ends

Hospitality business owners in England are warning that pandemic financial support is being withdrawn too soon, leaving some struggling to pay their bills.

From today [1 July] measures such as the business rates holiday and deferred VAT payments will end. Employers across the UK must also start contributing 10% towards furlough wages and some are already repaying government-backed loans.

This is despite restaurants, hotels and pubs still trading under restrictions due to the delay of 'Freedom Day' until 19 July, while others have not even been able to reopen.

"I've had to lay someone off to cover [the repayments]," said Henal Chotai, who co-owns the Red Cup Cafe in Harrow and began to repay his bounce-back loan in June. "That wage now has to be used for loan costs and business rates and furlough.

"If the government wants us to survive, they need to give us an opportunity. They should offer to extend repayments for a year. My fear is a lot of businesses now won't make it."

Nightclubs have budgeted for reopening on 21 June and many still have team members on furlough. Michael Kill, chief executive of the Night Time Industries Association (NTIA), warned that employers would face "difficult choices" about retaining staff as furlough costs increased.

In Essex, Michelle Utz, owner of the Hoop pub in Stock, questioned why support was being cut off before the industry had recovered.

"Our business rates are nearly £2,000 a month; that's a huge amount of money to make before you can pay it back," she said.

"People see a busy pub and think they're making loads of money, but it's not the case. We have had to close one day a week [due to staff shortages], so that's £4,000 less we're taking. My rent doesn't change, and I don't get a discount on business rates because of that.

"It doesn't matter if we're busy for the next two or three months, we've been shut and had a massive loss over the past 18 months, which we're still trying to catch up with. The government support shouldn't end when [the pandemic] hasn't."

The furlough scheme has seen the government pay 80% of the wages of people unable to work, up to £2,500 a month. This will reduce to 70% from 1 July and 60% in August and September, leaving employers to pay the extra 10% and 20% alongside National Insurance and pension contributions.

The changes come as restaurants, pubs, and hotels across the country are being forced to close due to staff needing to self-isolate, meaning operators face higher bills while unable to trade. UKHospitality has urged ministers to consider extending the business rates holiday and reduced furlough contributions for venues unable to open.

Chotai warned the increasing costs will be difficult for some hospitality businesses to bear in the long-term. He said: "It's like a train coming towards you demanding money. You know it's coming on time and it's a case of who's going to get off the track. The next six months are going to be tough for hospitality."

The devolved administrations in Scotland, Wales and Northern Ireland have all extended the business rates holiday for hospitality firms until the end of March 2022.

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