UK hospitality faces a ‘tsunami of debt’ from Christmas shutdown

Britain’s pub and restaurant trade faces a “tsunami of debt” as the economy shrinks under lockdown, losses that will take years to recover, official figures laid bare today.

The UK economy declined by 2.6% in November, said the Office for National Statistics, figures that while better than expected set the stage for worse to come.December and January could be brutal.

Chancellor Rishi Sunak said the statistics show things “will get harder before they get better”. 

Economists predict UK GDP fell by 13% in 2020 overall.Pubs and restaurants saw sales drop nearly 73% over Christmas, usually their busiest period, according to the Coffer Peach Business Tracker.

David Coffer, chairman of The Coffer Group, said: “The accrual of debt has become critical. The crucial date will be March 31 when the moratorium for insolvency is removed and many operators will face more than a year of unpaid property outgoings that landlords will be able to aggressively pursue.  

“Similarly, there are debts relating to rates, taxes, VAT, insurance and repayment of business loans. Altogether a tsunami of debt that needs to be dealt with.”

The services sector is now 9.9% smaller than a year ago, the ONS said.

Its director for economic statistics Darren Morgan said: “The economy took a hit from restrictions put in place to contain the pandemic during November, with pubs and hairdressers seeing the biggest impact.”

One day after incoming US President Joe Biden unveiled a $1.9 trillion stimulus plan, there were calls for more UK government support, perhaps including cash handouts to families.

Melissa Davies, chief economist at Redburn, said: “The onus is on policymakers to put in place a comprehensive stimulus.” She thinks households should be handed cheques while the Bank of England buys up crisis loans.

Alpesh Paleja, CBI lead economist, said: “The tougher current lockdown means a bigger hit to the economy lies ahead. Nonetheless, with vaccine rollout gathering pace, there are tangible reasons for optimism later in 2021.”