Industry facing 'two years of hell'

By Ed Bedington contact

- Last updated on GMT

Can the sector survive the economic challenges?

Related tags: Government, Coronavirus, Finance, Public house, Restaurant, Pub & bar, ukhospitality, Luke johnson, Kate nicholls

The industry is facing “two years of hell” and needs to “batten down the hatches and probably pray” according to one leading sector investor.

Speaking at the UK Hospitality conference yesterday (7 June), Luke Johnson said he’d like to be optimistic, but “unfortunately, I won’t be”. 

“It’s going to get really bad this Autumn. Companies should be raising money to protect themselves against what Jamie Dimon, the ceo of JP Morgan Chase described as an economic hurricane.

“There's only one course of action and that's to batten down the hatches and probably pray.”

Johnson, a serial investor in hospitality including companies like Pizza Express, Patisserie Valerie, Gails and Laine, said we could already see companies losing money off the top line. 

He added: “When the top line softens there's a big chance of companies seeing the weakest profits in living memory or go into losses. Companies have large arrears and liabilities that have not been paid back, CIBILs are kicking in. There's a perfect storm gathering, we have almost everything against us.

“I hope that as many businesses and jobs can be preserved as possible, but I fear there's going to be two years of hell. The survivors will be fitter and face less competition.”

He said any idea of further support from the government was laughable. “We probably got more support than any other industry [during the pandemic]. The idea that the government is going to come to our rescue, that's just for the birds. It's down to us and somehow were going to have to manage this, there's no easy routes out.

“At the end of the day, we're a discretionary spend, when people get their heating bills in winter and they see the increased food prices, they're only going to be able to spend on essentials - we're in denial if we pretend otherwise.”

Johnson’s pessimism flew in the face of other panellists at the conference, with John Miesner, md of Interpath Advisory, saying he was more optimistic, with far more funding options open to operators now compared to the previous credit crunch.

“There’s an abundance of capital out there to help people achieve what they want to achieve. I don't disagree it's going to be challenging, but if you've got a coherent story and it stacks up there's money out there to support it.”

Kate Nicholls, UK Hospitality ceo, who had started the conference talking about the need for relentless optimism, said Government needed to help talk up the industry to help change the perception that it’s higher risk.

“The Government invested 39bn to help industry stay afloat,” she added, “that's 39bn reasons to keep it going now.”

However she did admit that there “was a sense of brace” at the moment, “but that’s we do, we’re agile and innovative, and she said UK Hospitality’s role was that when the industry has to brace, they will be there to ensure a “soft landing”.

Related topics: Rebuilding the Pub Sector

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