By Kunal Sawhney, CEO of Kalkine (www.kalkine.co.uk)
The struggles for the UK hospitality sector are far from being over. Besides problems like staff and cash crunch, job losses, reopening hurdles, operators and trade bodies have been warning the government on the pending rent debt crisis, which might trigger business failures and more job losses within the sector.
With the vaccine rollout progressing steadily, businesses across the sectors are hopeful for a great start. But for the hospitality sector, where some of the operators have reopened from 12 April, basic operational problems are creating hurdles as it is yet to address the £2.5 billion worth of unpaid rent bills due to the pandemic lockdowns and restrictions.
In a recent letter to the Communities & Local Government Secretary of State Robert Jenrick MP, trade bodies have asked the UK government to intervene and resolve the issue.The UKHospitality has highlighted though some landlords have been supportive and understanding towards their tenants, commercial landlords are in no mood to forgo the rent and have been aggressive in their approach.
The trade body has highlighted that nearly 40-45% of the businesses are still bargaining the existing and pending rent with their landlords. Another 20-30% are still looking at ways to settle their debt so that they can start afresh after the lockdown norms have been lifted.
Expressing their concern, sector experts said that the sector may face tougher days in the near future because of the losses incurred last year alongwith the mounting rent.According to the data provided by the UKHospitality Quarterly Tracker, the sales of the hospitality sector between April 2020 and March 2021 dropped to £46 billion, which is a decline of 64% from £126.8bn in April 2019-March 2020.
Experts further added that the commercial rental debt is an unresolved issue, which has been repeatedly ignored by the UK government.
On its part, the government so far has tried shielding the businesses from getting evicted by the landlords after they introduced lease forfeiture and debt enforcement moratoria till December 2020.
In March this year, the government had further extended the lease forfeiture moratorium till the end of June this year. Experts feel the moratorium has brought the commercial property to a halt as lockdowns forced the tenants from paying their rents and prevented the landlords from taking any punitive action.
But the current situation has changed. Despite reopening of the economy, rent collection from commercial spaces is still below the pre-pandemic levels. According to latest government data, the rent collection is still at 70% mainly due to inactivity in the leisure and retail sectors.
Kate Nicholls, Chief Executive Officer at the UKHospitality, explained that the government should now sort out the issue or it might snowball into a bigger issue. Both the businesses and landlords need to bear the pain caused due to closures and lockdowns. She added that both parties should agree on rent concessions.
Besides this, the UKHospitality has forwarded a few recommendations to handle the current debt crisis.
• Extending the moratorium for six more months till end of this year.
• Expanding the protections to include all enforcement activity.
• Devising a national-level adjudication process on rent debt, which should resolve the issue forever.
• Landlords and tenants should negotiate on reasonable repayment.
There is no doubt that the hospitality sector needs a bit of handhold- ing after the reopening as it is one of the worst-hit sectors during the pandemic period. At present, removal of the government Covid-19 sup- port measures will be painful and may lead to evictions, failures, litigations, and job losses. One can think of taking the middle path to resolve the issue, where both parties can have a better future deal.