Words: by Keith Tully, Begbies Traynor

As the coronavirus pandemic continues to claim countless lives across the country, the hospitality sector was pushed out of action as peak lockdown measures ordered the shutdown of hotels and restaurants to help reduce the spread of Covid-19. As the economy unfurls to a new wave of consumer demand, the enforcement of local lockdown measures and curfews across Liverpool continues to pose a threat to the hospitality sector.

As we soon enter the latter quarter of 2020, government support is being tapered down to help viable businesses ease into individual life support systems. This act of intended mercy is likely to lead to the demise of unviable hotels, event companies, restaurants, bars and pubs already on the brink. Keith Tully of Real Business Rescue judges the trading landscape for Liverpool businesses in the hospitality trade as the coronavirus pandemic shows no sign of waning.

Hitting the restart button on a dormant industry

As the hospitality industry slowly recovers from weeks of non-trading, holidaymakers continue to stay put and restaurant-goers replace dining experiences with take-out services to curb the spread of Covid-19. To comply with changing public health guidance and reassure customers, hotel chains and local travel agencies have introduced measures to adapt to consumer needs and retain custom. This includes lockdown cancellation policies and enhanced lockdown cleaning rules to allow for a safer stay and to encourage customers to book with confidence.

If you need to weatherproof your hospitality business, it is vital to seek professional advice before the business begins to deteriorate as a result of:

  • HMRC arrears: Outstanding tax could lead to added interest and creditor pressure
  • Creditor pressure: Legal action against your business, such as a winding up petition, county court judgment or statutory demand could eventually result in compulsory liquidation
  • Poor cash flow: Staggered cash flow could lead to unpaid liabilities
  • Finance rejection: Poor credit history due to borrowing behaviour or lack of collateral
  • Overdrawn directors’ loan: Outstanding funds owed to the business could result in interest
  • Drops in consumer demand: Loss of key customers and supply chain delays

Failure to equip yourself against the above could lead to irreparable damage to your business and credit rating, eventually leading to business closure. Episode 47 of Downtown Den talks you through how you can safeguard against the further tightening of lockdown measures and how businesses in the region have been performing amidst the current coronavirus pandemic.

Protecting your hospitality business from Covid-19 financial pressures

If your business is resilient against the challenging trading conditions surrounding the coronavirus pandemic, track your cash flow and balance sheet forensically to spot any discrepancies or sudden changes. If your business experiences any financial hurdles understand that for each tribulation, there is a prescribed solution which can help your business onto the road to recovery.

If your business is struggling to keep on track of tax payments, a Time to Pay Arrangement with HMRC could help restructure your tax liabilities. If the problem is larger than fulfilling your tax liabilities and concerns the majority of creditors, you may be able to enter a Company Voluntary Arrangement (CVA). A CVA is suitable for viable businesses with strong prospects of profitability following an agreement with creditors to reallocate repayments into affordable instalments. If a cash injection is what you require to replenish stock and stimulate business growth, traditional or commercial finance can help facilitate this development.

The fate of hospitality businesses lies with their standards of preparation to withstand the tightening of Covid-19 lockdown rules and reduced government support. As the Chancellor’s Winter Economy Plan unveiled the Job Support Scheme to replace the furlough scheme and adjustments to the Coronavirus Business Interruption Loan Scheme (CBILS) and Bounce Back Loan Scheme (BBLS), this is likely to keep employees in jobs over the short-term, however, only time will reveal the true fall out.