Pubs, restaurants and hotels under pressure as the hospitality sector bears the brunt of COVID-19
Whilst 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. It is also likely to be the sector that is worst affected overall.
How can businesses in the hospitality industry deal with the financial consequences of the UK’s lockdown?
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 16 March. This was followed by the order for all pubs, cafes, restaurants, bars and gyms to close their doors on 20 March.
This unprecedented shutdown of an entire sector of the economy was a dramatic move in an attempt to slow down the spread of the virus. The lockdown has caused a financial crisis for thousands of businesses and placed millions of jobs under threat as a result.
It also seems increasingly likely that the hospitality sector will be amongst the last to see a relaxation of the current restrictions. 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.
For example, 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. Alternatively, they are facing the prospect of closing their business and are uncertain about how to do so in an orderly manner.
At Graywoods, we have in-depth experience of dealing with businesses at all stages of financial distress. We also have expertise in advising businesses in the hospitality sector, having worked with many pubs, bars, restaurants and hotels, dealing with turnaround plans, debt negotiations and closures.
If your business is currently struggling, the following suggested steps will help you in understanding the financial position of your business, creating a plan and making appropriate decisions at the right time:
Review the current financial position. Prepare a cashflow forecast based on the most up-to-date information and using prudent assumptions. This will allow you to consider whether your business can survive or whether a closure is inevitable.
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.
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.
Taking professional advice is key to ensuring that you have access to high-quality advice when you need it most. Graywoods has the expertise and experience to help businesses to cope with financial problems and can advise on all aspects of financial management. From turnaround plans to orderly closures where no other options are available, Graywoods can help.
For impartial, in-depth and professional advice on all aspects of turnaround, recovery and insolvency for hospitality businesses, call Deborah Lockwood on 0114 285 9500 or email [email protected]