Since lockdown measures were introduced in March, much has been reported about the devastating impact on the Hospitality and Foodservice sectors. As such, businesses operating in these areas have been offered a range of governmental support. The agricultural industry has also been offered financial help.
While the government’s swift action in support of these sectors is of course welcomed, and will prove invaluable in maintaining viable businesses, there has been a distinct lack of focus on what could be referred to as the ‘squeezed middle’.
More than 95 per cent of businesses which manufacture and supply food, or services, for the Hospitality and Foodservice sectors fall into the small and medium-sized enterprise (SME) category.
Just like our restaurants, hotels, cafes and bars, these businesses have lost their customers and are struggling to stay afloat, but are doing so without the same levels of financial aid.
Many businesses also face the prospect of being unable to recover payment for stock supplied prior to lockdown. Some report that 50 per cent of their customer base have either delayed payment or not paid outstanding invoices.
While it can be argued that the Coronavirus Business Interruption Loan Scheme (CBILS) or Bounce Back Loan Schemes (BBLS) are in place to offer support, in practice these funds are proving ineffective and difficult to get at.
Recent survey results indicate that fewer than half of food and drink manufacturers have applied for such help, mainly to avoid incurring further debt and additional interest payments beyond year one.
Worse still, of those that did apply, fewer than 50 per cent actually received funds.
In response, BFFF CEO Richard Harrow, with the support of Paul Rooke of the British Coffee Association, has lead on a policy paper produced by the Food and Drink Federation (FDF) which highlights the issue of the ‘squeezed middle’. The paper sets out a range of practical steps that need to be taken to ensure these businesses are able to play their role in a post-virus recovery.
- Businesses supplying into the hospitality and food service market should continue to receive furlough support through the government at a rate of 80 per cent of salary contribution until those markets return to commercially viable levels.
- Government should formalise the deferment of PAYE and NI payments until end September 2020 for businesses supplying into the hospitality and food service market, basing the final removal of that deferment on those businesses returning to a commercially viable level of operation.
- Until the end of September 2020, HMRC should ensure that all VAT repayments are made to businesses supplying into the hospitality and food service market as they fall due, rather than being used to offset against PAYE & NI payments.
- Government should extend the 12-month Local Authority Business Rates exemption to businesses supplying into the hospitality and food service market, using the existing legislative exemption for hardship.
- Government should expand on how its guarantee will operate, specifically what the 1 April date relates to (e.g. order date, invoice date, payment due date) and how it will continue to work with the trade credit insurance industry to ensure cover continues to be provided by all.
- Government should place a requirement on the trade credit insurance industry to develop best practice rules of operation which include greater transparency and formal notification of the reason(s) for refusal or withdrawal of cover.
- Insurers should be required to reinstate reduced or withdrawn cover back dated to 1 March 2020, except where there are clear and identifiable reasons as to why this would no longer be appropriate.
- Government should now focus on ensuring all trade credit insurers have adjusted the basis on which they provide cover to reflect the particular challenges the pandemic is placing on the ‘Squeezed Middle’, – particularly their willingness to pay vs their short-term ability to pay as a result of Government-imposed operational restrictions.
- Government should provide more targeted support for businesses that does not incur additional business debt e.g. a relaxation of current rules for Apprenticeship Levy funds to allow businesses to maintain existing employment.
- Government should put in place ongoing capital and tax break allowances to maintain the workforce. These could be pro-rated depending on how many staff a company is able to keep employed.
- A moratorium should be provided to allow monies due to local or central Government to remain in businesses to aid cash flow, until the hospitality industry fully reopens.
- Governments should create schemes for small, medium and micro businesses that provide initial cashflow injections to businesses requiring support to secure orders for materials and/or build stock in readiness for the recovery of customer demand.
For those businesses who are predominantly supplying into the wider hospitality and foodservice, government urgently needs to ensure they are supported using similar mechanisms to those in place for other badly affected parts of the economy.
Without this support, the foodservice and hospitality cannot hope for a meaningful recovery post-coronavirus.