The hospitality industry is raring to go – summer is here, Brits’ Covid-19 savings are burning a hole in their pocket and they want to make up for lost time. But the UK government seems to have other plans and has extended the restrictions on social contact for another four weeks. Fair enough – the government does not want to put the public in harm’s way.
But this extension, from a business perspective, is almost worse than when Christmas was cancelled. Hospitality businesses have been given more lead time, but it is still devastating because of the significant investment they have already made preparing to open their doors fully on Monday 21 June.
They have already incurred substantial overheads – hiring and training more staff, purchasing additional stock, marketing and insurance – to name but a few necessities to make ‘Freedom Day’ and beyond a success. With the extension of social-distancing requirements, reservations have had to be cancelled, and a further four weeks of trading below capacity have to be endured.
Particularly worrying was the lack of clarity on the moratorium on commercial evictions, which had many business owners between a rock and a hard place – not making enough profit to cover expenses, coupled with a fear that landlords would soon be able to recoup £6bn in rental back-payments and take measures such as evicting non-paying tenants.
Now, with the news that the moratorium on commercial evictions will continue into next year, as well as an extension on winding-up petitions – which means creditors cannot force a company into liquidation to recover their debts – business owners can breathe easier.
This is, of course, a good thing, but I implore you not to relax for too long. Do not squander this opportunity, which is basically the gift of time. Start figuring out now what you are going to do come March 2022, when government support comes to an end.
Now is the time to decide how to negotiate, reschedule, refinance and perhaps restructure your affairs to ensure you not only survive the next nine months but thrive thereafter, and can grow your business and contribute to the overall economy.
Time after time, I tell business owners that ‘forbearance’ is not ‘forgiveness’, and yet time after time, business owners forget (or forgo) the advice. I know this is human nature but it’s a dangerous game to play, especially when so much is at stake.
My free advice is always the same: start the dialogue now. If you have not called all your creditors, do so – especially your landlords, as they may be hurting with the news that they may not receive rent for another nine months (for a total of two years). They will be thankful there are some tenants who are thinking about them and this will help get the dialogue going to find a balanced solution for both parties to deal with arrears and ongoing obligations.
I understand that I am asking you to have some really hard conversations, but it will take a load off your shoulders and your business will ultimately be in a much better position to succeed. Take action now – March 2022 is closer than you think.
Myles Jacobson is a partner at restructuring and investment practice ReSolve