Government urged to extend rent support or face 'bloodbath' of business failures

Trade body UKHospitality has written to both the Chancellor of the Exchequer Rishi Sunak and the Secretary of State for Housing, Communities and Local Government Robert Jenrick, ​warning that failure to take action will trigger a 'bloodbath' of businesses failures across the sector with thousands more jobs lost.

Over the past six months restaurants have been shielded from eviction thanks to the lease forfeiture moratorium, which was introduced in March and prevents landlords from repossessing commercial premises if businesses are unable to pay their rent as a result of the Coronavirus pandemic.

Unless renewed, this protection will end on the last day of the month, with many businesses facing evictions and other enforcement activity as a result. 

UKHospitality says many landlords have already made it clear they intend to use the end of the moratorium to issue winding-up petitions to tenants, both large high-street chains and individual businesses.

Following the forthcoming quarterly rent payment date on 29 September, the level of unsettled rent from this period within the hospitality sector will reach an estimated £1.06bn according to the trade body, which is 'mostly held' by 'otherwise viable businesses' that are not able to pick up the rent bill due to the almost total elimination of revenue during the second quarter as a result of the Coronavirus lockdown, and the slow return to business since restrictions began to lift in July.

The letter calls on the Government calls on the Government to extend the moratorium until 31st March 2021; ensure County Court judgements are prohibited for rent debt; and work with landlord and tenant bodies on levers to encourage negotiations such as through mandatory rent reviews where landlords are not negotiating.

UKHospitality argues that the extension of the moratorium for a further six months has numerous benefits. The prospect of a full year without revenue will compel some landlords that have been unwilling to negotiate to come to the table and find sustainable future agreements.

“The rent crisis, with the September quarterly rent day fast approaching, is the biggest threat to the recovery and future of hospitality," says UKHospitality chief executive Kate Nicholls.

"The sector has enjoyed a much-needed boost through August with the successful Eat Out to Help Out scheme which brought people back into our venues to enjoy the pleasure of eating and drinking out.

“But a huge economic shadow hangs over the sector; as things stand, later this month, many businesses will not be able to pay rent that is due. Landlords will be able to take back the keys and thousands of sites and the jobs they support will be lost.

“More time is needed to come to agreements. A moratorium that goes on until the end of March 2021 will allow businesses to trade through Christmas and New Year.

"With the ‘rule of six’ in place, that period is undoubtedly going to be tough but at least should generate more cash than had been possible in the closure period, putting tenants into a stronger position to repay debt accrued.

“While the hospitality sector has suffered through this crisis, we appreciate the landlord community has too. We would be keen to work with Government to build on our constructive partnership to ensure any future moratorium is targeted at those most in need and, potentially, conditional so that it brings parties together.”

Meanwhile, a further letter has been written directly to Prime Minister Boris Johnson from Deliveroo CEO and founder Will Shu calling for additional support to protect restaurants before the moratorium ends.

The letter, which has been co-signed by several of Deliveroo's major restaurant partners including Burger King and Itsu, similarly warns that failure to extend and/or modify the moratorium could undo the restaurant industry’s recovery and lead to many permanent restaurant closures.

Proposals put forward by the group include extending the eviction moratorium in city centres where footfall remains low; tapering payments of outstanding rent over the next year to ensure landlords can only demand a maximum of 10% of any outstanding arrears in October, and high street businesses are given the ability to gradually pay back arrears over the next 12 months; and creating temporary moratoriums to protect businesses affected by local lockdowns.

It also suggests the Government could discourage evictions by removing the ability to claim empty property relief on any premises where eviction proceedings were initiated due to rent arrears accrued during the moratorium.

The letter adds that doing this would also 'help rebalance negotiations' in CVA cases.

“The restaurant sector has worked so hard to get back on its feet over recent months, but this all risks being undone unless further action is taken on rents," says Shu.

"We urge the Government to consider these proposals, which will help protect the sector’s tentative recovery and ensure that our amazing restaurants can have a bright future.”