July 5, 2022

Finance & Economy

Let's Talk About Investment

Will $1 billion be enough to bail out the UK’s hospitality businesses?

Table of Contents

Hopes are growing that the new coronavirus variant, omicron, will turn out to be less harmful — and therefore less economically damaging — than delta. 

But one sector of the United Kingdom’s economy has already taken a serious hit from omicron’s emergence: the hospitality trade. Hotels, restaurants, pubs, clubs and bars have seen such a big downturn in business that the British government has stumped up more than $1 billion to cushion the fall.

In England, the U.K.’s largest nation, the sector’s decline is not due to any new public health restrictions. The government in London has not imposed any new measures on the hospitality trade, unlike the regional governments of Scotland, Wales and Northern Ireland, which have tightened regulations.

The sector’s decline in England has been largely due to customers’ health concerns.

“Our problems started after the prime minister announced on Nov. 27 that omicron was here,” said Damian Wawrzyniak, owner of the House of Feasts restaurant in Peterborough in the county of Cambridgeshire. “Straight after his announcement, we were bombarded with cancellations ”

A black and white photo of Damian Wawrzyniak, chef and owner of the House of Feasts restaurant.
“We were bombarded with cancellations,” said Damian Wawrzyniak, chef and owner of the House of Feasts restaurant. (Photo courtesy Damian Wawrzyniak)

Within three weeks, Wawrzyniak had lost more than $80,000 worth of reservations, and any hopes for the all-important day after Christmas — Boxing Day — were dashed. 

“The week before Boxing Day, we had zero bookings. Everyone canceled,“ he said.

That’s been happening across the country, according to Kate Nicholls of UKHospitality, a trade body representing more than 100,000 restaurants, hotels, pubs, clubs and bars. Omicron’s been a disaster.

“What we’ve seen over the course of December is between 40% to 60% of revenues eliminated in England and between 70% to 80% in Scotland, Wales and Northern Ireland, where tighter restrictions have been imposed,” Nicholls said, adding that the sector, which has already been battered by the pandemic, is heavily dependent on December revenue to get through January and February.    

Kate Nicholls, CEO of UKHospitality, poses for a photo while sitting at a table with a cup in hand.
“These businesses are very fragile,” said Kate Nicholls, CEO of UKHospitality. (Photo courtesy UKHospitality)

“These businesses are very fragile,” she said. “They haven’t had a chance to build up a buffer of cash reserves that would be essential and is what Christmas normally delivers for the industry to get them through the quieter months.”

Organizations like hers have been pressing the government to step in with financial aid. It was a cry for help that finance chief Rishi Sunak answered just before Christmas, unveiling a $1.3 billion business support package — the bulk of it aimed at the hospitality trade.

Sunak said that these measures will help “hundreds of thousands of businesses and the millions of people they employ.” But his aid boils down to a grant of £6,000 pounds, or $8,000, per venue. Just enough, said restaurateur Wawrzyniak, to pay his staff’s wages for a week.

“Obviously, I’m grateful that we’re going to get some help,” he said. “But £6,000 for a medium-sized business — it’s not much.”  

Wawrzyniak is not calling for more government cash, though many other businesses are. And Nicholls said that if customers continue to stay away from hospitality venues or if fresh COVID restrictions are imposed, more financial aid would be necessary.

“If conditions don’t improve in the New Year, we are going to need additional substantive support from government in order to prevent businesses from going bust and to save the jobs across the economy,” she said.

But the government is under intense pressure both to reduce its debt, which has spiraled during the pandemic, and to cut taxes to stave off of a cost-of-living crisis.

More help for hospitality may not be at the top of its agenda.

UK government aids battered hospitality businesses, but is it enough?