The hospitality sector is still facing a struggle to survive as businesses brace themselves for a triple-whammy of debt repayments, business rates and rising costs – just as the country moves into “Freedom Day”.
A recent survey shows that more than half of the UK’s pubs say they’ll struggle to keep afloat even as Covid-19 restrictions are lifted with some landlords predicting a five-year wait to see them move into profits.
The survey by the British Institute of Innkeeping (BII) found that only 42 per cent of pubs which responded were confident of making profit after today.
Pub landlords are concerned about the “perfect storm” of debt repayments and rising costs as the country emerges from the crisis, with full rent repayments expected from this month and staffing, utilities and food and drink supplies all increasing in cost.
“The resilience, goodwill and determination of our nations’ pubs has been incredible to witness over the course of the pandemic,” said Steven Alton, chief executive for the BII. “However, it is clear to see that this alone will now not be enough to ensure that their businesses survive.”
The figures also show the UK’s hospitality sector is still in a precarious position, with 55 per cent of pubs having built up debts of more than £20,000 during the pandemic, pushing up to £80,000 for a quarter of businesses.
Nearly 60 per cent said it will take more than two years to pay those debts off, with one in two of those believing more than five years will pass before they have fully paid off their Covid-19 debt.
Around half of pubs are also facing staff shortages, with almost half struggling to hire key workers. Low pay, zero-hour contracts and a post-Brexit exodus of staff from abroad have all taken a toll.
The shortage has helped to push wages up – good news for employees – but another financial hit to be absorbed by businesses. The BII survey found that around 72 per cent of businesses reported having to raise wages for front-of-house workers, with two fifths of pubs boosting pay by more than 10 per cent. Another 57 per cent have also increased wages for back of house and kitchen staff.
“Pubs provide so much more than just a place to socialise, contributing significantly to local employment, local suppliers and the wider economy, with the average pub paying around £140,000 into the Treasury every year,” Alton added.