Martin Wolstencroft to borrow £4m just to remain closed

Martin Wolstencroft

Last year’s rolling closures forced Martin Wolstencroft to borrow £4m just to ensure the survival of Arc Inspirations, a bar chain with 17 venues across the north of England that he has spent the last two decades building into a successful business.

And the latest lockdown has forced Mr Wolstencroft to ask his bank to lend him another £1m.

He is far from alone. UK Hospitality says the closure of pubs, restaurants and hotels is costing business owners such as Mr Wolstencroft £500m a month, even allowing for any government support. And that has led to a huge rise in debt.

“The money that we are borrowing is really just to stand still,” Mr Wolstencroft said.

“We’ll be coming out of this in a far worse position with far greater debt and it totally reduces our ability to grow our business for the future.

Hospitality worst-hit as unemployment rises again

He reckons the debt he has taken on so far will take the business six years to pay back, which leaves him facing some difficult decisions.

Chancellor Rishi Sunak has announced a package of grants worth up to £3,000 a month per property to keep retail, hospitality and leisure businesses afloat until the spring.

But Mr Wolstencroft, who pays rents of more than £16,000 a month on some of his bars, described the grants as a “mere drop in the ocean”.

Threat to jobs

The effect of taking on huge debts with no prospect of reopening soon is a major threat to millions working in the hospitality sector.

More than 1,600 restaurants closed last year, costing 30,000 jobs, says property adviser Altus.

When bars, hotels and other hospitality businesses are included, almost 300,000 jobs were lost last year as a result of the pandemic, according to figures from the Office for National Statistics.

And that figure is expected to more than double in the first three months of this year alone.

Kate Nicholls, the boss of UK Hospitality, predicts the total will hit 660,000 by the end of March.

Kate Nicholls

image captionUK Hospitality chief executive Kate Nicholls is calling for further support for the industry

“The longer that these restrictions are in place, the more rapidly businesses will simply run out of cash and be unable to remain open,” she said.

A survey of the trade body’s members revealed that 80% of businesses did not have enough cash to make it through to April. “It’s going to be unbelievably brutal in the first quarter,” Ms Nicholls said.

‘Very worrying’

The latest lockdown follows a bruising Christmas period for the hospitality sector, which typically depends on a busy December to tide it over during January, traditionally a quiet month for pubs and restaurants.

“It’s obviously very worrying for our industry,” says Tim Hughes, who runs the Plough pub at Sleapshyde in Hertfordshire.

Between them, Mr Hughes, his brother and his father run three pubs in the St Albans area. They have already borrowed £350,000 and Mr Hughes says the latest lockdown will force them to take on even more debt just to survive.

Monthly fixed costs at each of the pubs run to £9,500 and only one of their venues qualifies for the full £3,000 grant, so Mr Hughes says the Treasury’s support “doesn’t touch the sides”.

It’s the fourth time Mr Hughes has been forced to close the doors to the Plough – and each time it has cost him about £5,000.

This time, he also had to give away £4,000 worth of jumbo pork, vegetarian and vegan Bavarian bratwursts, bought to give 2,000 customers a substantial meal in the pub’s “winter garden” during the festive period.

That was before an unexpected decision to put St Albans into tier three forced him to close the pub. He cancelled those bookings and refunded customers their £16,000.

Seating and a heat lamp under a marquee

Half of Marston’s employees are under 25, he said. “I really worry about the impact of this on their employment prospects in places where it’s very difficult to find employment.”

He has called for pubs to be given more time before they are required to pay business rates again, which will leave pubs facing an £800m bill as soon as the current rates holiday expires in March, according to the British Beer & Pub Association.

That would force landlords, including Mr Hughes, to foot a bill that works out to £25,000 a pub.

“Past recessions have shown very clearly that it’s coming out of a recession – when companies are short of working capital – that they fall over.”

For Mr Hughes at the Plough, he is looking for all the support he can get to avoid being put into a “bigger black hole”.

A Treasury spokesman said: “”We’ve taken swift action throughout the pandemic to protect lives and livelihoods.”

He said the grant scheme would continue to support businesses and jobs through to the spring.

Source: https://www.bbc.com/news/business-55529130

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