Bank debt write-offs to hotels and restaurants rise by £60m

Research by Mazars has revealed that banks have written off £99 million in loans to restaurants and hotels in the past year, up from £60 million a year earlier.

The research indicates that Banks are increasingly writing unpaid loan repayments off as bad debts with a 65 per cent increase in write-offs of loans to restaurants and hotels during the pandemic,

Banks have written off £99 million in the year to March 2021, write-offs in lending to the leisure sector have begun to rise again as businesses struggle with costs after the lockdown while government support tapers off.

The research says that the hospitality sector will feel the impact of the end of support schemes, the repeated cost of reopening and restocking and recruiting staff.

Some venues have also suffered from a fall in customers as people’s lifestyles have changed since the pandemic, such as homeworkers staying away from city centres.

Financial support, including the Coronavirus Job Retention Scheme, which saw the government pay 80 per cent of furloughed employee’s wages will end on the 30th September, whilst the suspension on landlord action for rent arrears will end in March 2022. There are fears the number of insolvencies in the sector will rise dramatically when support stops.

Rebecca Dacre, partner at Mazars “It is clear that we have yet to see the full extent of the pandemic’s financial impact on hotels and restaurants. However, the data is now starting to show more signs of stress in the sector”

“As support from the Government starts to wind down, we’re now beginning to see the true impact of the pandemic on the leisure and hospitality industry.”

“Businesses that are just keeping their head above water are likely to be taken under by the end of government support schemes, the repeated cost of reopening and restocking, difficulty recruiting staff and lower occupancy or covers due to people’s changing habits or working patterns.”