Aug 16, 2020

It’s bloody out there, but we must fight on

written by Lisa Eason

This is my 40th year in the food and drink trade — and it’s easily the worst. Covid-19 and, more significantly, an extended lockdown, have crippled the industry like no previous downturn. One restaurant company I backed threw in the towel last week. An insolvency practitioner sent me a letter saying that the business had gone into administration. Investors such as myself will lose all our capital — I expect creditors will, too. Most of the handful of restaurants it owned will shut, although the owner might buy one back (without his external shareholders).

The operation was not large — it had revenues of perhaps £5m — but 50 staff have lost their jobs and landlords will be left with several vacant sites. It is a sad, modest failure among the hundreds of catering companies going bust during these desperate times.

Some restaurateurs are celebrating this month’s Eat Out to Help Out scheme, with more than 80,000 outlets participating. In its first week, the public consumed 10.5 million discounted “meals” — which can consist of nothing but a cup of coffee. The Treasury announced that the scheme might cost the taxpayer £500m by the time it ends on August 31, although I predict it will be only £250m or so.

Unfortunately, I suspect that the very busy Monday-to-Wednesday traffic that the scheme has generated is cannibalising weekend revenues. Moreover, 13 days of cheap meals cannot really make up for four months of closure for 80% of operators.

Meanwhile, all pubs, restaurants and cafés that are trading are required to adopt social distancing measures. This guidance restricts the volume of trade retailers can do — and means many establishments can, at best, serve only half their normal number of customers, and will therefore lose money.

At one extreme, Covid-19 precautions can be truly dystopian: enforced hand washing on arrival; obligatory supply of contact details; one-way movement in the venue; virtual menus only; Perspex screens between each table; severely restricted food and drink choices; limited hours of opening; staff all wearing masks and so on. That experience is so grim that I avoid any such outlets. Sadly, tinpot dictators in certain local authorities are enjoying exercising their draconian powers.

One prominent caterer, who boasted to me about the severe hygiene regime his pizza restaurants had adopted, said it was because he “suffered pneumonia some years ago”. Doubtless certain patrons, scared witless by the government’s propaganda, feel that such ludicrous steps make these venues “safe”. I would prefer frightened citizens to cower at home — and let the rest of us enjoy ourselves and relax.

Too many operators have forgotten that their priority is to provide customers with decent food, drink and warm service in friendly surroundings. Endless rules, reminders of a pandemic, queues and short-staffing are very off-putting — especially for a public that has survived without eating and drinking out for many months.

People might decide that this discretionary habit is one they can give up. Many owners are struggling for survival — so cutting wage bills, portion sizes and even putting up prices should be no surprise. But these measures are likely to be counter-productive. As ever, the weak are going to the wall and the strong will prosper.

Lots of dining and drinking establishments will never restart. Plenty of others that have reopened will close when landlords evict them this autumn, since millions of pounds in rent is owing. Others will restructure themselves or give up, overwhelmed by liabilities and meagre sales.

I predict that between 10%-20% will shut their doors permanently during the course of this year and the next. Of the 2.5 million people employed directly and indirectly in the industry, perhaps 500,000 will lose their jobs. Related sectors such as hotels, travel and leisure are being similarly battered. This is a tragic, self-inflicted disaster that could have been largely avoided by adopting different public health policies (see Sweden for details).

Most of the casualties will be independent businesses, tired brands and over-leveraged firms. Better-financed and resourced players will exploit the chaos by negotiating improved rent deals on new sites, boosting their spending on digital platforms and growing their delivery channels. They will also have the pick of the talent suddenly available thanks to bankruptcies.

The industry will rebound — smaller, leaner and bloodied, but still a great place to work and an irreplaceable element of a full life.

Hospitality entrepreneurs are known for their resilience, and no one is giving up without a fight.