Give help to bars and restaurants — or they’ll shut, banks warned
MPs and business chiefs today called on banks to support the crippled hospitality sector through the final weeks before reopening or risk triggering mass closures of restaurants, bars and pubs. The plea came as the Evening Standard uncovered growing evidence that small and medium-sized hospitality businesses are being categorised as “high risk” by lenders and starved of loans and overdrafts just when they need them most. Operators can start serving food and drink outside from April 12 and inside from May 17 under
Boris Johnson’s plans. However, there is widespread alarm that accumulated debt and unpaid rent, as well as depleted cash reserves, will mean many will fall at the final hurdle if they are not “cut some slack” by their lenders. Conservative MP
Kevin Hollinrake, co-chairman of the all-party parliamentary group on Fair Business Banking, urged banks to “step up” to support firms as the end of lockdown looms. “In their time of need, hard-working businesses in the hospitality industry are struggling to get the support they need from banks, who are closing the door to them,” he said.
“Downgrading any industry at this point is unhelpful at best. It is almost impossible to assess risk at this point.”
Although they have not had to pay most of their staff wages, rates and most rents, restaurants have suffered a slow bleed of cash covering utility bills, insurance, IT and payment systems and other outgoings that have drained them of cash. In many cases over the winter the only income has been from deliveries and grants of up to £3,000 a month. Government-backed CBIL and Bounce Back loans — as well as the furlough scheme — have helped hospitality businesses defer insolvency but there are increasing fears that many are swamped by debt and may not even be able to cover the costs of reopening in the spring.
Steve Double MP, Tory chairman of the all-party parliamentary group for hospitality and tourism, said: “I would just hope that banks would recognise the unique circumstances and be as flexible as they can to enable businesses to reopen as soon as the restrictions are lifted.”
He has written to Chancellor Rishi Sunak urging him to increase the Bounce Back loan limit from £50,000 to £70,000 as some businesses need extra working capital to stock up and reopen.
Some businesses have not been able to access any Government-backed loans. Labour MP Siobhain McDonagh, who sits on the Commons Treasury Committee, said: “Great latitude was given to the banks in the last financial crash and we all paid to keep them afloat. Now is the time for them to reciprocate.”
A number of operators spoke of their frustration at not being able to secure the support of lenders increasingly nervous of their exposure to one of the worst-hit sectors in the entire economy.
Alex Proud, owner of cabaret venue Proud Embankment, said the banks’ attitude towards his business changed in November — the time of the second lockdown — after a successful summer’s trading. He said: “The bank had been very supportive of us getting a
£750,000 CBIL in April but in November they suddenly said ‘we are going to put you on business support’ even though we were nowhere near breaking our covenants. They dressed it up as ‘we’re here to help you but my financial adviser screamed ‘this is the death knell’.” Mr Proud said it was costing him £20,000 a month to keep his venue closed with the only income a £3,000 a month grant.
Asif Mahammad, founder and chief executive of specialist consultancy Main Course Associates, which advises around 70 mainly West End restaurants, said: “In most cases the banks have been hopeless. They are putting hospitality businesses in the high-risk category — that is what we have been told. The banks are not playing ball and it’s very, very important that the Government sends out the message ‘you need to support these business through the final hurdle’.” He fears that without an extension of CBIL loans, up to 30 per cent of the restaurants the firm advises “could decide to shut down for good”.
Des Gunewardena, chief executive of fine dining group D&D London, said: “Losses have got to be funded either by shareholders or banks. For our business that is costing us £1.5 million a month just to be closed.”
Hussein Ahmad, director of specialist hospitality accountant and consultants Viewpoint, said: “I don’t know of a single client that has been able to access additional support outside the government bank loans.”
Mr Sunak is expected to announce a package of measures that could make it easier for restaurants and bars to raise money in his Budget on Wednesday. This is likely to include an extension of the business rates holiday, VAT relief, extending furlough, and possibly easier terms for repayment of CBIL loans.
A spokesman for UK Finance, the trade association for the financial services sector, said banks had provided “unprecedented levels” of support for businesses in the pandemic, including thousands in the hospitality sector. “UK Finance and its members will continue to work with the Government and other groups to ensure businesses are able to access the finance they need.”