Labour warns 650,000 hospitality businesses at risk of collapse before lockdown ends

By James McAllister

- Last updated on GMT

Labour warns 650,000 hospitality businesses at risk of collapse before lockdown ends

Related tags: Labour party, ukhospitality, Coronavirus, Closure, lockdown

More than a third of hospitality businesses – an estimated 650,000 companies – fear collapse in the next three months, Labour has warned.

As speculation continues to grow that restaurants and pubs could remain closed until May​, new analysis released by the opposition party shows that the average hospitality or leisure business will receive £11,000 less in grant support during the third lockdown than it did during the first.

Labour has accused the Government of 'economic negligence' if it fails to act, and has called on Business Secretary Alok Sharma to 'be the voice of business, not a mouthpiece for the Treasury' and back businesses in England by urgently outlining how he will support struggling hospitality and leisure businesses to survive the crisis.

Analysis by the Labour Party based on the latest ONS survey data suggests that more than 650,000 accommodation and food services businesses have little confidence they will avoid collapse, and more than a million will run out of cash reserves in the next three months.

Lucy Powell MP, Labour’s Shadow Minister for Business and Consumers, said: “A million firms are struggling with a cash crisis threatening jobs and livelihoods just as the vaccine offers hope. The cost of business insolvencies and unemployment on this scale would take a wrecking-ball to our economy.

“If the Government fails to act on this latest evidence, and doesn’t bring forward an urgent, comprehensive plan, they’ll be guilty of economic negligence that will choke off the recovery, and damage our country for years to come.”

A Government spokesperson said: ‘‘We’ve invested more than £280bn throughout the pandemic to protect millions of jobs and businesses - and extended our self-employed and furlough schemes through to April so that people have certainty that help is in place.

"For hospitality businesses that comes on top of a business rates holiday, VAT cuts and top up grants worth up to £9,000 per property to last them through to the spring.”

It come as UKHospitality has issued its own warning that enormous swathes of the hospitality sector are on the verge of collapse following 'the worst year of trading on record'.

As part of its evidence to the Treasury Select Committee Inquiry into the Economic Impact of Coronavirus, the trade body highlighted that four in 10 sector businesses stated that they would fail by mid-2021.

Only one in five have enough cash flow to survive beyond February under present levels of support.

Recent figures from UKHospitality’s quarterly sales tracker, in partnership with CGA, reveal the devastating impact of the pandemic to the sector in 2020 – with sales collapsing by 54% sector resulting in a loss in revenue of £72bn.

The sector’s decline is likely to have knocked off over two percentage points from total national GDP.

UKHospitality states that the sector will begin to recover when it is able to reopen, but can bounce back much more rapidly with the right support in place. It has called for an extension of the VAT cut to 5% to for a further 12 months, and a further business rates holiday for hospitality for 2021/22.

“Put simply, hospitality is battling for survival," says Kate Nicholls, UKHospitality Chief Executive.

"Our sector has been the hardest hit sector by the pandemic and is staring into the abyss. But if the right conditions and support are put in place, we could be justifiably optimistic of the future role hospitality can play in returning the country to growth and boosting employment."

Related topics: Business & Legislation

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