Hospitality cash reserves run low

By James McAllister

- Last updated on GMT

Hospitality cash reserves run low

Related tags: Coronavirus, lockdown, Business support, Government

More than half of hospitality firms now have less than three months of cash reserves left, according to data from the think tank Institute for Public Policy Research (IPPR).

The troubling figures form part of a larger study that reveals that almost one third of UK firms (weighted by turnover) are at risk of collapse in the spring if financial support measures from Government are not extended.

This corresponds to almost 600,000 employers at risk, together employing approximately nine million people.

Existing schemes, such as Government loan guarantees and the Job Retention Scheme (JRS), have been successful in helping businesses and prevented widespread bankruptcies during the pandemic. 

However, much of this support is due to end in the coming months with applications for loans set to close in March, and the JRS due to be wound down at the end of April. 

The IPPR data shows that in the ‘accommodation and food service activities’ sector, more than 50% of businesses now have 'low cash reserves', which equates to less than three months reserves - considered a danger point for a business.

Back in October that figure was at around 40%, according to the report.

The IPPR said it is “calling for rapid action by the Chancellor to save the businesses on which UK economic recovery will depend when the lockdown is gradually eased, by extending and enlarging business support now".

In its recommendations to the Government, the think tank echoes repetitive calls made my industry bodies including UKHospitality and the British Beer & Pub Association (BBPA) to extend business rates relief and continue the VAT cut to 5%. 

It also calls for the JRS to be extended beyond the end of April, and for additional grant support to be made available in proportion to business needs and lockdown restrictions.

The data shows that recent levels of grant support were insufficient to improve firms’ aggregate cash buffers. 

On top of the nominal monthly grants worth up to £3,000 available to closed businesses, the only additional aid offered to hospitality firms during the ongoing third national lockdown is a one-off payment worth up to £9,000.

Chancellor Rishi Sunak is expected to set out the next wave of business support in the March Budget, with speculation growing over what the financial relief hospitality will receive.

Last week the Treasury signalled that further business rates support could be coming, after a minister advised councils not to issue bills​ until after the Budget on 3 March.

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