Government Aid Plan And The Potential Pitfalls

Posted on Mar 19, 2020. by NTI

As was reported yesterday, the government announced a £330bn packing to aid businesses struggling with the impact of Covid-19.

The main bulk of funding would be provided by way of low cost, easily accessible loans to large businesses and extending the Business Interruption Loan Scheme for SME’s announced in the budget last week.

However, as mentioned in NTI’s CPD Tap on the budget measure, these are still loans and they will still attract interest, however low and require repayment.

As reported by the BBC, Liverpool restaurant owner Peter Kinsella has written an open letter to the government stating that he would never be able to repay the loan as his business, who employs over 100 staff, was already barely making ends meet.

The issue is that the high street and leisure industry was already struggling prior to this outbreak. We have seen big restaurant chains such as GBK, Prezzo, Jamie’s Italian, Carluccio’s and Byron close outlets, enter CVA’s or administration. And this is before we start looking at the number of smaller restaurants that have closed their doors over the last couple of years.

With businesses already suffering from lack of demand, now the government is actively telling people not to go outside and London heading into lockdown by the end of the week, this could be the end to many businesses who really cannot afford to repay a significant loan on top of their other liabilities.

ASK has written to all customers taking the decision to close its doors as of last night and many other restaurants are choosing to do the same so not to provide a temptation for people to break government advice.

The knock-on effect of the restaurant industry closing its doors is the number of workers suddenly becoming unemployed.  Whilst some businesses may have given up, others are continuing offering a delivery, collection or takeout service to mitigate the amount of lost trade by closing the doors to seated guests.

We do not yet know what further measures will be necessary in the form of movement restrictions and lockdowns, but it is likely we have not seen the worst of the impact as yet. Even with the aid offered by the government, it is unlikely to save many in the already suffering leisure industry.

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