Member Article

Hospitality sector bears the brunt of COVID-19

WHILE almost all parts of the economy are reeling from the sudden and dramatic effect of the government’s response to the coronavirus outbreak, the hospitality sector was the first to feel its effects…and it is also likely to be the sector that is worst affected overall.

Pubs and clubs were amongst the first businesses to be impacted by the government’s actions when it advised people to keep away from hospitality businesses on March 16.

And this was followed by the order for all pubs, cafes, restaurants, bars and gyms to close their doors on March 20.

It now seems increasingly likely that the hospitality sector will be amongst the last to see a relaxation of the current restrictions and there is, as yet, no indication of when pubs, bars and restaurants will be allowed to reopen, or if they will need to implement major changes in order to do so.

Deborah Lockwood, a partner with leading Sheffield insolvency and recovery practice Graywoods, points out that if social distancing measures continue for the foreseeable future, this could dramatically reduce the profitability of venues which are no longer able to hold a sufficient number of customers.

“This is leading a significant number of business owners to consider whether their business has a future and, if so, how to manage the situation in the meantime,” she said.

“Alternatively, they are facing the prospect of closing their business and are uncertain about how to do so in an orderly manner.”

Graywoods has extensive experience working with many pubs, bars, restaurants and hotels, dealing with turnaround plans, debt negotiations and closures.

Deborah explained that as the hospitality industry waits to see what impact the lockdown will have long term, there are already things that companies can do to create a plan and make appropriate decisions at the right time.

“The first thing to do is prepare a cashflow forecast based on the most up-to-date information and using prudent assumptions,” she said.

“This will allow you to consider whether your business can survive or whether a closure is inevitable.

“The second step is to minimise costs wherever possible, conserve funds and take steps to maximise income where possible.

“Consider whether the business can be put into hibernation whilst the situation becomes clearer, perhaps using the government’s ‘furlough’ scheme to cover some of the cost of wages for staff who are not needed in the meantime.

“Finally, keep the situation under review and take additional actions where necessary - this could include formulating a turnaround plan or taking steps to close down the business in an orderly manner.

“As ever, taking professional advice is key to ensuring that you have access to high-quality advice when you need it most.”

This was posted in Bdaily's Members' News section by John Highfield .