COVID-19 has hit those working in the hospitality industry harder than most, other than of course actors, singers and musicians, who, in addition to losing their audience, have also had their income from touring overseas severely affected.
And as case rates continue to rise in many countries, restrictions that once imposed closure are beginning to be lifted. The current bout of sunshine in the UK seems to bring everybody out to eat and drink, with terraces full to overflowing. The time is right, in my opinion, to consider the many disadvantages and the few opportunities of the previous two years.
On paper the outlook does look grim. New research undertaken by chartered accounting firm Wilkins Kennedy has reported a 31% increase in restaurant insolvencies in the UK during the last quarter of 2021. According to the figures, nearly 200 restaurant businesses collapsed during this three-month period, the largest number in any quarter since Q1 2009 at the start of the last recession. Ongoing economic concerns forcing down discretionary spending has been cited among the reasons for the sector’s struggles, as well as increases in VAT and the minimum wage.
And the position on VAT is only going to get worse. The UK VAT rate on hospitality has risen from 5% to 12.5% and will, under current plans from Chancellor Rishi Sunak, rise again to its pre-pandemic rate of 20% on 1 April this year. VAT is not a subject that is widely discussed over the dining table even though it appears on nearly every bill. And numerous restaurants have testified that this cut, with its immediate boost to cash flow, was essential to their survival during 2020 and 2021, saving them from either having to close down completely or to make very drastic redundancies. Across three London restaurants – Joké Bakare’s Chishuru in Brixton Village; Shuko Oda and John Devitt’s Koya group, which at that time consisted of two restaurants (there is now a third on Hackney’s Broadway Market); and the much larger JKS group, which is behind Brigadiers, Gymkhana, Hoppers, Bao, Lyle’s and numerous others – this cut in the VAT rate saved them a minimum of £37,000, £300,000 and £3.7 million respectively.
The temporary reduction in VAT bought the whole of the British restaurant industry both money and time. But now its increase comes at the end of the furlough scheme which, while less of a pressing need for restaurateurs than it was six, or even three months ago, is nevertheless yet another cost for those who might still have staff on furlough.
When I quizzed a London restaurateur about the possible ‘benefits’ of the COVID-19 era, his response was immediate and, not surprisingly, short: his emailed response read ‘low VAT, no rates, and rent deals’. The business rate relief ends this Thursday on 31 March, so those who have been claiming it will now have to pay 66% more from 1 April, while the possibility of rent deals has very much depended on the approach of individual landlords. In general it would appear that those restaurateurs outside the city centres have fared better than those operating the better-known restaurants of central London. In addition, national insurance contributions will increase by 1.5% from 6 April.
Two further ways that I thought the pandemic and associated restrictions may have actually improved the lot of those involved in the restaurant industry are unconnected. The first is the drop in printing costs as restaurants were forced to switch from printing menus to sharing QR codes, and the second may have been in the growing appreciation of waiting staff, who all restaurateurs I know have complained are in short supply. This is not just the result of the pandemic but is also one of the unfortunate consequences of Brexit as many talented overseas staff have headed back home.
I wondered whether waiting staff were more appreciated in Paris and asked Mark Williamson, the restaurateur behind Willi’s Wine Bar and Macéo close by.
‘I think the novelty of appreciation has worn off quite rapidly, like the appreciation of the garbage collectors and the clapping of nurses. Clients have not changed. They want it all, just as before. The only visible difference being the younger, impoverished – so it seems – clientele who insist on dividing their bills down to the last centime. This can be more time-consuming for us restaurateurs than checking COVID passes and sterilising all the tables.
‘Personally I hate menus that have to be looked at on phones. Total crap and I am unconvinced it will save the planet while people continue to drive around in their tank cars. It’s gadgetry which will inevitably lead to people ordering their meals online and cutting out the middleman.’
Williamson ended with what to me was a novel observation. ‘What has changed is the working from home and the need for meals in the co-working office. This is visible, growing and here to stay. This will require restaurateurs to adapt, favouring those who were brave enough to branch out during COVID-19.’
But there are perhaps three positive consequences of the pandemic that are universal and definitely here to stay.
The first is that ‘premiums’, the amount a restaurateur selling a lease used to demand from any newcomer, have virtually disappeared according to Ted Schama, the MD of Shelley Sandzer, the long-established restaurant agents.
The second is the growing appreciation of outdoor spaces and terraces, a prerequisite that today every restaurateur is demanding before even going to look at a prospective site or development. There are several reasons for this: those able to offer outdoor seating were the first to welcome back customers once restrictions were lifted; global warming is making such places viable for longer in the year; and eating and drinking in the sunshine is one of life’s pleasures, however close the traffic may be. Outdoor seating and drinking will have to remain under the control and legislation of the local authority but the pandemic seems to have lifted the heavy-handed approach of many local authorities that used to be the norm. This seems to have been one of the changes that has been applied in all major cities internationally – although in a recent report by TLT solicitors, the legal situation remains quite unclear.
The final change is that, while international travel has been restricted, leading to a reduction in the number of overseas visitors in many restaurants, this loss has been offset by the growing number of local customers, unable to travel, who have chosen to spend their money in our restaurants. One of the most lamented consequences of the lockdown hastily imposed before Christmas 2021 was that, in the absence of Christmas celebrations the year before, many were looking to spend in style. But this was not to be the case, sadly.
An immediate consequence of this has been that trading in the period mid January to the end of March 2022 has been much stronger than anticipated and certainly considerably stronger than normal for this time of year. Customers have enjoyed restaurants in lieu of overseas travel and restaurateurs hope that when the anticipated higher cost of living may reduce local custom, the demand will be taken up by overseas visitors. As I have said many times before, the essential prerequisite for a successful restaurateur is to be a born optimist.
Image by Anastasiia Chepinska courtesy of Unsplash.
