No other sector in the UK economy has been as badly impacted by Coronavirus as pubs, clubs and restaurants, which have been forced in and out of lockdown with bewildering speed and uncertainty, with confusing local tier restrictions in between.
Unfortunately, the industry went into the pandemic in a highly vulnerable financial condition. Research by the financial health monitoring specialists Company Watch covering early 2020 revealed that almost 60% of the 50,000 companies were in its warning area, with a one in four risk of failure. A quarter of companies had negative balance sheets, with greater liabilities than their assets. It has long been a fragile sector, contributing 4% of GDP but experiencing 12% of insolvencies in recent years.
Despite the severe disruption, many enterprising entrepreneurs have changed their business models at breakneck speed to preserve their businesses. Restaurants and food pubs are now providing heroic numbers of takeaways and extraordinary volumes of eat-at-home boxes, whilst many have done well with online cookery courses or making exclusive recipes available via the internet. Traditional pubs and breweries have found life more difficult, but some wet-led pubs have done good trade with takeaways whenever alcohol bans have not been in place, while craft brewers have been particularly nimble in marketing their products online.
Nevertheless, there has been a net decline of 7,724 licensed premises between December 2019 and January 2021, a drop of 6.6% and the worst fall since records began. More premises have closed permanently in the past thirteen months than in the previous four years combined.
Government support measures have stopped the carnage being even worse, but at the price of leaving businesses struggling with excessive borrowings and allowing their trade debts to build up to alarming levels, particularly for rent arrears. Coping with these burdens and getting through the recovery and back to normal trading will take some advanced financial tightrope walking skills and is likely to benefit from independent expert advice.
Business challenges faced by the Hospitality sector
- Downsizing property portfolios where locations are no longer profitable
- Re-sizing and reorganising premises
- Restoring staff morale and re-integrating furloughed staff
- Recruiting new staff to replace the many who have left the UK
- Staying nimble in a changing leisure and hospitality environment
- Reflecting evolving food trends and eating habits
- Repaying loans taken out during the pandemic
- Negotiating with landlords on rent arrears and future rents
- Dealing with potential supply chain disruption from Brexit
- Absorbing ongoing bio-security costs without damaging profitability
- Repairing balance sheet damage caused by falling property and other asset values
- Making sure the business is both solvent now and viable for the future
- Securing adequate funding, especially for post-Pandemic growth
- Producing meaningful and realistic financial forecasts
Helping businesses in the Hospitality sector
Partners and staff across the various Opus service lines have extensive experience and knowledge of the hospitality sector.
Ways in which we support companies, business owners and their management:
- Carrying out comprehensive business reviews to assess and advise on a broad range of financial and commercial issues
- Assisting with financial forecasting
- Reviewing financial and operational systems
- Advising and supporting in negotiations with key stakeholders, such as lenders, landlords and suppliers
- Raising new funding
- Providing strategic advice on changes to the business model or on managing growth
- Seeking out acquisition opportunities
- Advising on exit routes such as the sale or merger of the business
- Undertaking forensic investigations where circumstances dictate
- Planning and assisting with restructuring projects
- Offering independent advice on solvency issues