Companies operating in the hospitality industry could be at the greatest risk of insolvency, according to a survey of corporate insolvency and restructuring professionals.
Insolvency and restructuring trade body R3 asked its members which three sectors of the economy would be most affected by the coronavirus pandemic – and almost four in five of them put the pub (79.8%) and restaurant (78.7%) industries in their lists.
Tourism operators were chosen by almost two-thirds (63.9%) of those surveyed, with hotels (40.4%) and retailers (31.1%) being the next most common choices.
Alexandra Withers, North East chair of R3 and an associate solicitor in the insolvency department of Short Richardson & Forth Solicitors in Newcastle, says: “It’s not surprising that the sectors our members expect to be hardest-hit are those where physical interaction with customers is a critical part of day-to-day business – and given the importance of the hospitality sector to the regional economy, it’s a particular concern for the North East.
“For many retail, hospitality and leisure sector companies, margins were already razor-thin before the pandemic, and relied on operations running at or near capacity.
“Lots of people are undoubtedly very keen to get back to social venues such as pubs and bars, to go on holiday, and to enjoy a meal out after a day’s shopping – but the necessary public health measures that these businesses have had to put in place for this to happen safely and the reduced capacity that unavoidably follows will put their potential profitability in doubt.”
Earlier this month, Chancellor Rishi Sunak launched a new ‘Eat Out To Help Out’ scheme, which has been designed to help the hospitality sector by offering customers a 50% discount on food and non-alcoholic drinks up to a total value of £10 per person on Mondays, Tuesdays and Wednesdays in August.
Alexandra Withers continues: “We’ve seen lots of North East hospitality businesses adapting what they offer by launching new take away and delivery services, while the ‘Eat Out To Help Out’ scheme will hopefully boost takings next month by encouraging more people to go out to eat.
“Our consistent message to business owners in any sector is to seek qualified advice as soon as they become aware of financial problems potentially coming down the line, rather than ignoring them and hoping they’ll go away.
“The sooner you act, the more options will be available for tackling them and the greater the chance you’ll have of finding a positive way forward.”