Hospitality firms urgently need urgent clarity from Sunak over £2.5bn of unpaid rent

If it really is a case of “one more heave” on vaccinations before restrictions on the hospitality sector can be eased, what’s the best way to ensure the country’s pubs, restaurants and nightclubs survive to take a shot at recovery?

The two most important measures may be these. First, an extension of six months to the ban on landlords evicting tenants. Second, a government-backed framework for the two sides to share the accumulated pain of unpaid rents.

As things stand, the moratorium on evictions is due to end suddenly on 30 June, and it requires no imagination to envisage chaos.

Hospitality firms, broadly defined, are estimated to have built up £2.5bn of unpaid rent during the pandemic and the hardball class of landlord will want to grab what it can. Fear of being at the back of the queue of creditors will tempt some to make demands for unpaid rent on day one, potentially killing thousands of businesses before they’ve had a chance to try to trade their way out of crisis.

Rishi Sunak is obviously aware of the problem since he’s been lobbied from all sides. The chancellor does, though, need to announce his decision very soon, which means this week.

For many pubs and restaurants, uncertainty over rent arrears is a bigger worry than any tweaks on business rates that may or may not be granted (an extension to furlough, it seems, is not on the cards).

A sketch of a framework would put a ringfence around rents accumulated during lockdown, with landlords and tenants given six months to negotiate a solution between themselves. If they can’t agree, arbitrators would then impose a deal.

That, more or less, was a model proposed in April by British Land and Landsec, two property giants that can afford to take a long view. It is also, roughly, what trade bodies in the hospitality industry want.

A critical detail would be the instructions given by the government to arbitrators. A default assumption of a 50/50 split in the bill would not work in all circumstances or all sectors. Some “essential” retailers have been open and trading during lockdown but have still not paid full rent; it is hard to see why they should be treated as generously as a pub or nightclub that suffered a full blast of restrictions.

But the broad principle of “burden sharing”, or rent forgiveness, in the hospitality sector seems sound. It is only the government that can make it happen in a semi-orderly fashion. Sunak needs to hurry up.

Richard Alvin

Richard Alvin has a number of investments across the media and fashion sectors. Entrepreneur of the year in 2014 Richard is also Group MD of Capital Business Media and SME business research company Trends Research, regarded as one of the UK’s leading experts in the SME sector and an active angel investor and advisor to new start companies in addition to being the host of Save Our Business the U.S. based business advice television show.

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