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Hospitality Industry Tells the Government to Solve Rent Problem to Save Restaurants

With restaurants expected to pay rent in two weeks, trade body UK Hospitality says that the government must act now to break the deadlock

The front of Joy Luck restaurant on Gerrard Street in Chinatown, with green-and-red signage Michaël Protin/Eater London

UK Hospitality, the trade body representing restaurants, pubs, and cafes in the U.K., has announced today that unless the government acts swiftly with financial and legislative support, businesses will fail and significant job losses will be inevitable. The trade body says that a continued “stand-off” between tenants and landlords on the key matter of rent, needs to be resolved; and that the government’s non-interventionist strategy to-date has not worked. The body has explicitly called for an extension of the forfeiture moratorium, which prevents landlords evicting tenants affected by COVID-19, from the end of June until the end of this year.

Following news yesterday that the government is now planning to bring forward the date of reopening for some restaurants and hospitality businesses to 22 June, UK Hospitality chief executive Kate Nicholls said: “We are moving towards the reopening of the sector and many people [...] are keen to see businesses open again. Unfortunately, all the good work in keeping businesses afloat during lockdown and the best-laid plans for restarting, could be completely undone by the impasse on rents.”

“The stalemate on rent, with the June [24] quarterly rent day fast approaching, is the biggest threat to the recovery and future of hospitality,” Nicholls added.

The situation has remained largely unchanged for months, despite government legislation preventing landlords from using intimidation tactics, with mutually exclusive self-interest continuing to make an equitable solution impossible in many negotiations. Restaurants cannot pay because they have been closed or trading at reduced capacity, while landlords cannot sanction long-term rent holidays without either their own assurances from banks or protection from government.

Nicholls has written to chancellor Rishi Sunak, business secretary Alok Sharma, culture secretary Oliver Dowden, and communities secretary Robert Jenrick, warning that “hospitality businesses hammered by COVID-19 and facing difficult trading for the foreseeable future, will be unable to come to rent settlements without support.”

The letter proposes three initial measures to “resolve the deadlock”, including:

  • Tax credits for landlords to incentivise rent waivers for tenants.
  • Property bounce back bonds to cover lost revenue during the closure period (effectively government reimbursement for approximately three months of rent, depending on when the given tenant is able to reopen and recommence rent payments)
  • The introduction of a “furloughed space grant scheme”, which would require the government to pay some or all of the owed rent on behalf of the tenant, an idea borrowed from Denmark.

The trade body has also reiterated its willingness to work with government, landlords, tenants, and investors to help deliver an “equitable solution” and “facilitate negotiations.” Last month, UK Hospitality outlined a series of steps it felt needed to be followed in order for a solution to be found on the issue of rent, which included a proposed “high-level ministerial summit” in which it sought involvement from all stakeholders to reach an agreement. No confirmation has been given that such a summit took place, or that the government has yet acted on any of the recommendations. Eater has requested comment from UK Hospitality on the status of the proposals outlined last month.

Today, Nicholls said that when businesses are next expected to pay rent, in two weeks, many will simply not be able to given the current situation. “We have lost an entire quarter’s revenues to COVID-19 and the prospects for trading from July to September look severely limited,” she said, emphasising that even if some businesses are able to reopen this summer, long-term social distancing measures and expectations of low consumer confidence are going to result in “businesses trading at a fraction of capacity.”

Nicholls concluded that it was no longer viable for the government to hedge in the hope that tenants and landlords resolve the problem themselves. “The reality is [...] we are at a point where the government has to step in and act decisively, otherwise businesses will go under, jobs will be lost, and rent will never get paid.

“Fiscal support is now the only option if we want to avoid business failures. The government must consider supporting hospitality businesses who cannot pay rent. A continued stand-off does not help anyone.”