Government urged to act on rent crisis to prevent ‘hospitality bloodbath’

14-Sep-2020 - Last updated on 14-Sep-2020 at 10:22 GMT

Economic shadow: 'as things stand, later this month, many businesses will not be able to pay rent that is due. Landlords will be able to take back the keys and thousands of sites and the jobs they support will be lost,' Kate Nicholls explained

UKHospitality (UKH) has warned the Government that failure to resolve the ongoing rent crisis will trigger a “bloodbath” of hospitality businesses failures and thousands more job losses.

In a letter to the Chancellor of the Exchequer and the Secretary of State for Housing, Communities & Local Government, UKH urged the Government to extend current rent moratoria until 31 March 2021, ensure county court judgements are prohibited for rent debt and work with landlord and tenant bodies to encourage negotiations.

The Government has thus far shielded businesses from eviction and the most aggressive forms of enforcement by landlords over the past six months through lease forfeiture and debt enforcement moratoria.

However, these are due to end on 1 October with an estimated £760m in unsettled rent from the last six months within the hospitality sector still outstanding – a figure expected to increase to an estimated £1.06bn with September’s rent quarter payment date looming.

According to UKH, this outstanding debt is mostly held by otherwise viable hospitality businesses that are not able to foot the rent bill due to the near total elimination of revenue in Q2 and the reluctant return to business.

What’s more, the trade body – which represents more than 700 companies, operating around 65,000 venues in a sector that employs 3.2m people – says many landlords have already made it clear that they intend to use the moratoria’s expiry to issue winding-up petitions to tenants from both high-street chains and independent businesses.

Huge economic shadow

According to UKH chief executive Kate Nicholls, the impending September quarterly rent day and rent crisis poses the biggest threat to the recovery and future of hospitality.

“The sector has enjoyed a much-needed boost through August with the successful Eat Out to Help Out scheme which brought people back into our venues to enjoy the pleasure of eating and drinking out,” she explained.

“But a huge economic shadow hangs over the sector; as things stand, later this month, many businesses will not be able to pay rent that is due. Landlords will be able to take back the keys and thousands of sites and the jobs they support will be lost.

Constructive partnership

Nicholls added that more time was needed to come to agreements, that the extension of the moratorium for a further six months carries numerous benefits and that the prospect of a full year without revenue will force unwilling landlords to come to the table.

“A moratorium that goes on until the end of March 2021 will allow businesses to trade through Christmas and New Year,” she continued.

“With the ‘rule of six’ in place, that period is undoubtedly going to be tough but at least should generate more cash than had been possible in the closure period, putting tenants into a stronger position to repay debt accrued.

“While the hospitality sector has suffered through this crisis, we appreciate the landlord community has too. We would be keen to work with Government to build on our constructive partnership to ensure any future moratorium is targeted at those most in need and, potentially, conditional so that it brings parties together.”