Retail and hospitality leaders have urged the Government to tackle the £5 billion of rent debt owed to landlords ‘as a matter of urgency’ warning of widespread business failures without some form of resolution.

Giving evidence to the House of Commons Treasury Committee UKHospitality CEO, Kate Nicholls has highlighted the need for further Government support for the sector, which remains unable to trade profitably under current restrictions.

Nicholls highlighted that thousands of hospitality businesses are all in jeopardy due to months of enforced closure, more than a year of strict trading conditions and ongoing uncertainty. The hospitality sector has lost more than £87bn over the last year, leaving businesses deeply in debt and at risk of suffering “economic long Covid” if the right support is not forthcoming.

Nicholls said “Current government support is not sufficient to cover the sustained hit on revenues that businesses in the sector have suffered following months of lockdown and more than a year of tough trading restrictions. Average hospitality monthly costs are between £10,000 and £20,000, while the average government support is £3,000 per month.”

Nicholls reiterated the importance of the Government sticking to its roadmap and lifting all restrictions on June 21st, as currently only 2 in 5 hospitality businesses are operating profitably and many, such as nightclubs, are yet to reopen. A full and final ending of restrictions is the only way to ensure that businesses in this sector can trade effectively.

She told the committee “After re-opening in full, the industry must be given breathing space to gauge customer demand. To achieve this, the Government needs to work alongside the sector, landlords and shareholders to find a solution to the £2 billion-plus in rent debt that hangs around the neck of the industry.”

In a UKHospitality survey, one in five sector businesses said that rent debt will lead to insolvencies, and that rent debt will cast a long shadow over the sector, impacting its ability to rebound quickly. Nicholls called for an extension of the eviction moratorium and for landlords to equally share the pain with businesses in the sector by writing off 50% of rent debt for closure periods.

UKHospitality is calling for urgent reform of the business rates system, which discriminates against hospitality businesses, and a permanent reduction to VAT are also needed if the sector is to be able to recover to its fullest extent. Hospitality can, as it did after the 2008 financial crash, play a key role in the economic recovery of the UK and in the ‘levelling up’ agenda of the Government but only if it is given the proper support.