Rishi Sunak Apparently Has No Idea What It Costs to Rent a Restaurant

Rishi Sunak has put fear into the hearts of restaurant, pub, cafe, and bar workers two days before he announces the Budget that will, for many, decide their future. Sunak told the Andrew Marr Show that the annual rent for a restaurant and pub is “somewhere between £14,000 — £20,000,” when explaining the basis of the latest round of coronavirus grants to be announced on 3 March.

Those comments first run up against the substance of those grants, which are tailored to three “rateable values”: up to £15,000; between £15,000 and £51,000; and over £51,000. The need for the those windows suggests that Sunak’s averages are already skewed; the response from operators suggests they are wildly wide of the mark. The chancellor said:

“For a typical restaurant or pub, they would have rent, on an average year, of somewhere between £14,000 to £20,000. So grants up to £18,000 to help you reopen over the next few weeks and months should be put alongside that and, together with furlough for example, we have taken care of the two big costs over the past year that many of these businesses have.”

A Royal Institute of Chartered Surveyors benchmarking survey from 2017 put the average pub rent at £87,357 in London; over £40,000 in both south east and south central; and £25,550 in the north west. No region’s average rent was under £20,000, with the national average at just under £38,000. Commercial rents tend to increase between 2 percent and 5 percent year-on-year, and pubs with lower rents often receive them under the “tie” model, in which they must buy stock from a managing company under “wet rent,” which wipes out the money saved on the tie.

Rent is both restaurants’ biggest cost and biggest worry. With commercial eviction protections yet to be extended, and no intervention on the landlord-tenant relationship, the billions of rent debt accumulated by hospitality businesses will weigh heavier and heavier as time goes on. The government itself knows it cannot indefinitely extend the rent moratorium; it also knows that these grants do not fix the debt. Sunak’s belief on the average rent will inform any belief on average debt, so its inaccuracy could prove even more terminal further down the line.

While restaurants, pubs, and their trade bodies have welcomed new grants, hearing such comments on the eve of a crucial Budget will not bode well for the announcement and the months between now and reopening after lockdown. While the feeling that hospitality has been “scapegoated” throughout the coronavirus crisis remains overrepresented relative to the evidence of such scapegoating, this unexpected major error will not fill operators with confidence for the coming months.