By Kunal Sawhney, CEO of Kalkine (www.kalkine.co.uk)
The second lockdown announced over the weekend by UK Prime Minister Boris Johnson has come as a shock for most non-essential businesses, especially the hotel and hospitality sector.The step has been taken to prevent a “medical and moral disaster” after the government said confirmed cases of coronavirus are going up at an alarming rate. On Tuesday (4 November), there were 20,018 lab-confirmed cases in the UK, taking the total number of cases to 1,073,882.
Johnson while declaring the new restrictions, which will be implement- ed from 5 November to 2 December, said people would be asked to stay at home as much as possible, unless for specific reasons including work and education. Pubs, restaurants, gyms, leisure areas and non- essential shops will have to close for four weeks from Thursday (5 November). However, takeaways and click-and-collect services will remain operational.
The new lockdown has left many industries displeased as the festive season is about to start. Most businesses are of the opinion that the government should provide enough financial support to the hospitality sector that at least equals that offered earlier in the year. Experts have said that the cost of the second lockdown on the hospitality sector will be even heavier than the first.They said the forced closure could see the accumulation of mass debt and job losses due to the four-week long restrictions.
HOSPITALITY SECTOR AT A GLANCE
The UK’s hospitality sector is the 3rd largest employer and constitutes 4 per cent of Britain’s overall GDP. As compared to other sectors, the hospitality sector is almost double the size of financial services and bigger than automotive, pharmaceuticals and aerospace combined.
Picture this:The UK has about 22,000 hotels, motels and guest houses. Besides this, there are more than 16,000 breakfast restaurants. According to the British Hospitality Association data, tourism and hospitality have around 27,000 businesses and employs about 1.6 million people.
Despite the Brexit and staff shortages, the number of hosting and food services facilities has grown nearly 20% in the last five years. Before the coronavirus pandemic, the sector provided 330,000 employment opportunities, full time, part time, direct or indirect.
According to the Office for National Statistics (ONS) data, the hospitality sector is one of the worst hit sectors due to the pandemic.The hospitality sector witnessed an 87 per cent fall in its sales in Q2 of 2020, according to a leading British hospitality trade body UKHospitality.
The sector saw revenue of £4.6 billion from April to June, in comparison with £34.2 billion a year earlier, shows a New Quarterly Tracker compiled by UKHospitality and research firm CGA.
The coronavirus pandemic has affected Britain’s hospitality sector to a large extent, with nearly 500,000 jobs being lost till now.The sector contributed around £133.1 billion in 2019 to the economy, following 3.9% growth, but just a year later, it has come down to less than £100 billion.
Taking only the beverage producers in account, the YoY sales in Britain’s beverage industry has plunged by £11.1 billion between 22 March and 8 August.
SECOND LOCKDOWN EFFECTS
Ever since Johnson announced the second nationwide lockdown, the hospitality sector has been anticipating a severe blow on their already struggling revenues.According to UKHospitality in the second lockdown, the turnover of Britain’s hospitality sector could go down to £65 billion or less.
In the first lockdown, the closure of pubs was devastating for small- time brewers.The sales, according to industry sources, went down by 82% on average. Many pubs had to throw away around five million pints, with the cost borne by the brewers.
Kate Nicholls, the chief executive officer at UKHospitality, said the second national lockdown could be detrimental for the industry.The period between Halloween and Christmas Eve gives a third of the sector’s total turnover, which would be totally lost.
The struggling sector, which has seen massive job losses due to the coronavirus outbreak, could see more jobs wiped off. A recent report compiled by UKHospitality, the British Institute of Innkeeping and the British Beer and Pub Association (BBPA) anticipate that the sector would be left with only 750,000 jobs by February 2021, if the government does not provide support to the businesses.
Emma McClarkin, Chief Executive Officer at BBPA, said the second lockdown could prove counterproductive and damaging for the sector with major disruption to supply chains and the UK’s brewers.
James Calder, Chief Executive Officer of the Society of Independent Brewers, in a statement said: “Furlough funding cannot alone keep businesses afloat. Small breweries still have rent, business rates, beer duty and VAT payments coming up – if they are unable to trade, then they cannot pay these.”
SURVIVE OR PERISH
Undoubtedly, the second nationwide lockdown will add more woes to the already ailing hospitality sector.The businesses have been hit hard since the beginning of the first lockdown in March.The latest restrictions have just added some more woes to the sector facing financial hard-ships.
The time between Halloween and Christmas is the most lucrative time of the year, but the business of 500,000 shops, restaurants and pubs will suffer due to the month-long lockdown. For the hospitality sector, the road seems to be tough with the rising Covid-19 cases.The challenge is for businesses which have survived as the viability is on the knife edge. Thousands of businesses and jobs depend on hospitality, including the supply chain and other support services.
Industry experts have already said the furlough plan will not be enough this time and want the government to pump in more money. Perhaps a stimulus package or change in policy in terms of tax relaxation for the hospitality sector could ease down the effects of Covid-19.