Published 2 March 2021
In addition to the ‘what we’re reading’ section in the Bulletin, we’ll be sharing some of our favourite articles throughout the week
One of our Friends of CODE, Viewpoint Partners, has been supporting the most exciting restaurants and bars through accounting and financial consulting for more than eight years. This week the team shared its annual insight report.
The report is complete with a full year’s aggregated, anonymised data from around 30 of London’s best-loved independent restaurants – and some comments for the chancellor Rishi Sunak ahead of tomorrow’s budget announcement. Below you can read their ‘insights for the year ahead.’
In 2020, 20 weeks were spent in full lockdown with the restaurants and bars closed and 18 were spent with them open but operating under a restricted capacity. For 75% of the year, there was no option of ‘business as usual’.
It is not surprising that on average, the Viewpoint cohort lost almost 40% of their turnover in 2020 compared to 2019 figures.
In fact, it is a testament to these restaurants and bars and indicative of the resilience of the wider industry that by the end of Q4 their food and beverage gross profit was at pre-Covid levels.
The hospitality sector has demonstrated ingenuity and acumen by continually tweaking their offering – working out how to make meal kits and delivery models work under lockdown conditions, investing in their outdoor areas, installing set menus to control products and staff costs and marketing their pivots, all the while making constant changes to keep their staff and customers safe.
However, this would be impossible without support. Furlough has been invaluable in saving jobs but is at this point still creating significant cost for employer and [as at the time of writing] finishes at the end of April.
With a 39% drop in turnover, even with good food and drink gross profit, there are fixed costs that still must be paid from this pot. Hospitality businesses have already needed to access government-backed loans, make arrangements with HMRC, and when landlords were amenable to it, make deals with them too.
The biggest single threat to restaurants and bars is rent. Once the Government’s protections finish and the lease forfeiture moratorium ends at the end of March 2021, hospitality businesses who are behind on payments face the very real prospect of eviction. Without support themselves, some landlords may not be able to accept delayed or reduced amounts.
The VAT reduction from 20% to 5% on food and soft drinks, which came in on 8 July 2020, has made a huge difference by reducing tax costs. If this is not extended past 31 March this year when it is due to end, businesses will have to pass on the 15% to the customers they are trying to attract back, or else swallow it.
The Prime Minister has now released the roadmap dates for hospitality’s reopening: 12 April for outdoor hospitality, 17 May for indoor restaurants and bars and 21 June for nightclubs and weddings with unlimited guests.
Whilst it is welcome to have concrete dates in place, this now means one month at least with restaurants closed inside but no VAT reduction support, almost a month without furlough support and the added threat of your landlord being able to evict you if you don’t pay your rent.
We have so far heard nothing of an Eat Out to Help Out (EOTHO) type scheme for this coming reopening phase, like the one that did so much in August 2020 to restore consumer confidence in eating out. We do not know whether Chancellor Rishi Sunak will announce anything of this kind in the Budget on 3 March.
It is true that there are some positives to note. Spring is on the way, the vaccine programme is rolling out very successfully, there are competitive property deals to be had if you have the cash reserves. The increasing consumer uptake of restaurant meal-kits indicate a continued demand for restaurant quality food and for diners to support the brands they love. They are also an opportunity for restaurants to build a relationship with new customers nationwide.
Yet now is precisely the time for the government to be upping their support. If help is withdrawn prematurely, our proverbial ships might be dashed upon the rocks just as we catch sight of shore.
– The Chancellor to extend the business rates holiday until March 2022
– VAT should continue to be reduced to 5% on food and soft drinks until March 2022
– A concrete plan from the Government to support commercial landlords and their tenants
– Another Eat Out To Help Out style scheme to drive business for what is the third largest private sector employer in the UK
– Local councils to allow the pedestrianisation of suitable areas such as Soho, so venues can increase their outdoor covers and consequently their turnover
Boris Johnson’s roadmap has allowed businesses to start planning their re-openings in earnest, and the announcement from the Chancellor on 3 March will influence how we advise them to best allocate their precious resources in the coming months.
Now is the crucial moment. Hospitality businesses have shown great resilience and creativity in battling through their worst year on record. We implore the Government to help ensure they will make it through the next few months ready to provide the celebratory, social experiences we have all longed for.
Viewpoint Partners are a Friend of CODE. Find out more here