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Government Must Recognise Rent Debt Is a Massive Problem for Restaurants

A new report says that the hospitality industry rent stand off “can only be solved with government intervention”

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A new government report into the impact of coronavirus on business and workers has found that restaurants and pubs will require “targeted support” to address rent debt accumulated during the coronavirus pandemic.

As first reported by Big Hospitality, based on the report’s findings, the government’s business department acknowledges that the strategy to-date — introducing and repeatedly extending a ban on evictions — has just moved the ongoing problem down the road. “The [eviction ban] does little more than delay the inevitable, unless longer term measures are put in place,” the report says.

Among the “longer-term issues which are profoundly affecting businesses,” were commercial rent obligations. On that, it says, the government had “failed to offer solutions.”

The report gets at the heart of the issue, which restaurant owners have been pointing out for months. The ban on evictions is all well and good in the short term. But it doesn’t deal with rent that is still technically owed — and which will be demanded once that ban expires. “Whilst there has been a ban on evicting commercial tenants, businesses are ultimately expected to meet their rent obligations,” it says. It is, and has been since last March, the “single biggest issue” facing restaurants across the country.

The government has justified its non-interventionist strategy, opting to create the conditions for cordial negotiations, through its voluntary code of practice and ban on heavy handed tactics from landlords hoping to strong-arm tenants which had failed to meet their liabilities during the pandemic. Their measures had intended “to give time and space to landlords and tenants to agree reasonable adjustments to rent and lease terms, including terms for the payment of accumulated rent arrears,” according to the report.

While it has allowed some to negotiate terms, as an overall solution to the single biggest problem, it hasn’t worked. Since last autumn, restaurant trade lobbies and business owners have been urging the government to do more. So far it hasn’t. But last month, the government finally indicated that it may consider doing more.

With landlords facing their own liabilities and with restaurant tenants having been unable to generate revenue while closed for months during the last year, in many cases, the self-interests of each party remain mutually exclusive. “This conundrum can only be solved with government intervention,” the report states.

It concludes:

The Government does not appear to be any closer to identifying or facilitating a longterm solution to the difficulties faced by landlords and commercial tenants. While many landlords and tenants have been able to come to an accommodation, we are unconvinced that landlords and businesses will be able to identify a solution on their own in every case.

The Government should use the time afforded by current time-limited support measures wisely to identify long-term solutions. The Government should consider active measures to address the issue of growing commercial rent arrears, and proactively work with businesses, landlords, banks and other stakeholders to identify an appropriate long-term solution.

Elsewhere, like other research during the pandemic before it, the report also found that women, BAME workers and young people were “disproportionately represented in insecure work, or in sectors particularly affected by the pandemic,” which included hospitality. Those groups had been “hard hit,” it said. “We recommend the government urgently produces an economic assessment which sets out the opportunities and risks posed by structural long-term changes to the economy from the combined impacts of COVID-19, Brexit, and the net zero transition,” the report stated.