finance

UK hospitality industry faces ‘existential crisis’ over coronavirus


The hospitality industry is facing an “existential crisis” without urgent state help to get through the coronavirus pandemic, the government has been warned.

Boris Johnson used his press conference on Monday to advise people not to go out to pubs, restaurants and bars — but stopped short of ordering entertainment venues to close.

The prime minister’s comments prompted fury from many in the industry who believe they will be unable to make insurance claims without a concrete ban from the government.

But some insurance experts argued that many companies would not be able to claim on their business interruption insurance policies — even if the government did force the closure of premises.

It is also unclear how many businesses have insurance that covers new communicable diseases such as coronavirus.

The British Beer and Pub Association has written to Mr Johnson, demanding urgent steps are taken to prevent mass job losses and permanent pub closures.

BBPA chief executive Emma McClarkin said the industry faced an “existential crisis” as a direct result of the guidance issued by the government on Monday.

“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,” she wrote.

“Forced pub closures without a meaningful support package will have a catastrophic financial and social impact.”

The letter urged ministers to cancel all business rates payments for six months, as well as all tax payments including pay-as-you-earn, value added tax and corporation tax for pubs and hospitality businesses.

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At a press conference in Downing Street on Monday afternoon, Mr Johnson said: “What we are doing is giving very strong advice that public venues such as theatres should no longer be visited . . . as for enforcement, we have the powers if necessary but I don’t believe it will be necessary to use those powers.”

Mark Jones, chief executive of the Carluccio’s restaurant chain, said help had to be put in place immediately because the UK was just days away from the large-scale closure of many restaurants.

He told BBC Radio 4’s Today programme: “To do that to an industry without any fiscal support whatsoever condemns us to death effectively,” adding that “enormous state intervention” was needed.

Michael Kill, chief executive of the Night Time Industries Association, said: “The PM has unbelievably advised the public to turn their back on the night-time and events sector without an official closure or adequate financial support for businesses and staff.”

He urged the UK government to follow the lead of France, which offered €300bn worth of state guarantees for bank loans to companies to ensure that none failed.

Caroline Norbury, chief executive of the Creative Industries Federation and Creative England, described the advice as a “crippling blow” to creative industries.

“As the social distancing measures announced this afternoon are only advisory, rather than an outright ban, we are deeply concerned that creative organisations and cultural spaces will find they are unable to claim compensation for the huge losses they will experience as a result of Covid-19.”

Kate Nicholls, chief executive of UKHospitality, an industry body, said the new advice left the industry in “limbo with no recourse to insurance”. “This is catastrophic for businesses and jobs,” she added.

“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.”

Shadow culture secretary Tracy Brabin called on Mr Johnson to “urgently clarify” whether theatres, music venues and other venues would be entitled to claim insurance.

But some insurance experts said privately that many companies would not be able to make successful claims anyway.

Sources in the industry said business interruption insurance generally covered damaged buildings. There are add-ons for closures due to communicable diseases, but very few people buy them. Even those who have bought them may not be able to claim because some of these add-ons cover only a list of named diseases, and coronavirus is too new to be included.

While some companies might have a policy that covers closure due to communicable diseases, the extent of coverage will depend on the small print in the policy.

Michael Dugher, former chief executive of UK Music, the music industry body, said: “On the point about insurance, many businesses in hospitality, leisure and entertainment industries have insurance, but even if the government forced them to close, their insurance covers only limited business disruption — not a pandemic. Treasury need to step in and help these businesses.”

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An Association of British Insurers spokesman said: “We are working with members to assess the situation, and that firms should, in this fast-moving situation, talk to their insurer or insurance adviser.”



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