Covid-19 measures pose ‘catastrophic’ challenge for leisure industry

There are warnings the pub and brewing industry, along with the travel, retail and other leisure sectors face ‘an existential crisis’ in the wake of new government restrictions to combat the spread of covid-19

Prime minister Boris Johnson announced a stringent set of measures to contain further infections, which include asking people to work from home where possible, to avoid ‘non essential contact’ and to cut down on travel and social gatherings of more than a handful of people.

There was also specific advice to steer clear of pubs, clubs, theatres, cinemas and restaurants. While mass public gatherings have not been banned, there will no longer be provision for emergency service support at events.

In a letter to the prime minister in response, Emma McClarkin, chief executive of the British Beer and Pub Association (BBPA), stated: ‘The UK pub and brewing industry is tonight facing an existential crisis as a direct result of the guidance issued by the government today.

‘Thousands of pubs and hundreds of thousands of jobs will be lost in the very short term unless a proactive package creating cash and liquidity is provided immediately to the industry.

‘The government guidance advising that people avoid pubs did not provide any form of advice or clarity on how the industry should respond. This is unhelpful in the extreme.

‘At the same time the absence of any financial commitment to stand behind all businesses including small community pubs is creating panic with people being fearful that their livelihoods will be destroyed.’

McClarkin went on to outline a list of suggested actions to mitigate the financial crisis pubs and bars will face as footfall declines dramatically, with the restrictions likely to be in place for months.

They include the cancellation of all business rates payments for a period of six months, as well as all HMRC tax payments, including PAYE, VAT and corporation tax for pubs/hospitality businesses, and the cancellation of beer duty payments for a period of six months.

The BBPA is also calling for banks to be encouraged to extend credit lines and favourable-terms loan payment holidays to keep businesses afloat/pay wages. The association wants the government to put in place a temporary redundancy scheme in which, as in the Danish system, it commits to supporting 75% of the wages of those made redundant for a defined period.

Other options include a  VAT cut for a period of time in order to drive trade back to the hospitality sector and the postponement of the planned National Minimum Wage/National Living Wage increase due in April in order to ease pressure on cash-flows.

Kate Nicholls, CEO of trade body UKHospitality, said: ‘This is catastrophic for businesses and jobs. The government has effectively shut the hospitality industry without any support, and this announcement will lead to thousands of businesses closing their doors for good, and hundreds of thousands of job losses.

The government has effectively shut the hospitality industry without any support

‘Over the past few weeks the industry has suffered unprecedented drops in visits and many business are already on their knees. This latest advice leaves the industry in limbo, with no recourse to insurance.

‘We need immediate and far-reaching support from the government, and meaningful business continuity measures.’

Helen Dickinson, chief executive of the British Retail Consortium, said: ‘Tens of thousands of retailers face an uphill struggle as a result of coronavirus. Fewer store visits, lower demand for many goods, and the possibility of further restrictive public health measures, all threaten the survival of shops and jobs.

‘It is essential that the Treasury goes much further than the limited efforts outlined in the budget. The first step should be to follow Scotland’s lead by reversing yet another rise in the business rates burden this April, but more will be needed.’

Travel body ABTA issued a warning that ‘perfectly viable and normally successful UK travel businesses employing tens of thousands of people are at risk of going bankrupt’ because of the sudden drop in bookings.    

ABTA is calling for temporary changes to the UK Package Travel Regulations at European and UK government level, with immediate effect, arguing that ‘the existing financial protection structures and regulations were not designed to cope with a large-scale collapse of businesses’.

Its additional recommendations include changes so that tour operators are not responsible for providing refunds if these costs are not covered by the suppliers (e.g. the hotel or airline). Where those suppliers cannot or will not refund, ABTA says there needs to be an emergency government consumer hardship fund to fulfil refund payments.

The association wants the 14-day window in the regulations for refund payments to be removed, and for refund credits to be allowed as an acceptable alternative to cash refunds, with all protections carried forward as part of the refund credit.

In addition ABTA wants to see urgent action to enable the provision to all sizes of business of loans that the Chancellor and Bank of England announced last week with the access mechanisms for these loans made clear, and immediate deferment of HMRC payments for a period of six months in order to support cash flow.  It also wants a suspension of Air Passenger Duty.

Begbies Traynor is warning the ban on football fixtures could cause an insolvency crisis which would hit Football League clubs hard.

Paul Stanley, regional managing partner for Begbies Traynor in Manchester, said: ‘Cashflow through the turnstiles is what keeps football clubs afloat. It's the pies, pints and programmes sold at the matches that pay the wages. More clubs may go to the wall and too many are teetering on the brink already.

‘More will follow Oldham Athletic and Bolton Wanderers into trouble. Make no mistake, it's a major crisis. Finance directors and club owners may need to restructure and react swiftly to survive.’

Stanley also pointed out it is not clear whether sponsors and TV companies, now not able to show matches, will be willing or contractually obliged to make payments to the various leagues when their own advertising revenues will fall if events are not taking place.

‘The leagues then won’t be able to pay the clubs who in turn will struggle with paying wages. This may not be a problem for today but in a few weeks’ time it could become an issue,’ he said.

Concerns are also being raised about whether businesses will be able to claim on insurance policies in the event they are unable to operate because of coronavirus.

While the government has declared coronavirus a ‘notifiable disease’, which is a formal classification required by many insurance policies, many of these existing policies cite the specific diseases for which businesses can claim.  As coronavirus is a new disease, it is not named on most of these lists.

The Prime Minister’s latest advice to avoid pubs, restaurants, cinemas & theatres - whilst medically necessary - throws many businesses to the wolves. He needs to order them to close so they can claim against their insurance. I will be writing to him to ask him to update advice.

John Nicolson, MP for Ochil & South Perthshire, has tweeted: ‘The Prime Minister’s latest advice to avoid pubs, restaurants, cinemas & theatres - whilst medically necessary - throws many businesses to the wolves. He needs to order them to close so they can claim against their insurance. I will be writing to him to ask him to update advice.’

Accountants activate covid-19 contingency plans

Pat Sweet |Reporter, Accountancy Daily [2010-2021]

Pat Sweet was the former online reporter at Accountancy Daily and contributor to the monthly Accountancy magazine, pub...

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