Symbolism matters in politics. And how government has treated licensed retail over the past 14 months of the coronavirus pandemic has been all about symbolism. Symbolism and sending out the “right message” have always been the penchant of authoritarians. I take you back to the miners’ strike of 1972. Edward Heath was prime minister and the miners were striking for more pay. We had a three-day week imposed by government to reduce the consumption of electricity – then dependent on coal-fired power stations. This was the nearest thing, historically, to the economic shutdown and the stay-at-home orders we’ve seen as a response to the pandemic. 

 

To dramatise just how serious the miners’ challenge to government authority was, Edward Heath ordered all television stations to stop broadcasting at 10pm. And that’s exactly what this measure was – dramatisation. The amount of electricity saved by turning off the telly was miniscule compared with closing down great swathes of industry. But its purpose was to get the population to sit up and take notice. 

 

So, pointing out to government there is precious little evidence pubs, clubs, bars and restaurants have been sources of viral transmission, so imposing draconian restrictions on them simply isn’t rationally justifiable, entirely misses the point. This was always about “project fear”; getting the public to sit up and take notice – “look folks, this is serious, it’s so dangerous to meet up with other people, we’re closing the pubs.” 

 

This explains why the denizens of public health urged government to go even slower in terms of opening the economy, and why the latest bogeyman the “Indian variant” is being used as an excuse to delay “freedom-day” – 21 June – as the day on which all covid restrictions will finally be ended. So-called “public health” is fighting tooth and nail to delay this because it is desperate to retain the power over government decision-making that it has only so recently enjoyed.

 

If you want to understand what “public health in every policy” looks like as a means of governing society then the experience of the pandemic provides a brilliant case study. The modern so-called “public health” movement is fundamentally authoritarian. It doesn’t trust people to make good decisions for themselves and it has exploited a genuine public health emergency to vastly expand its influence over government policy. We have a Conservative government that has numerous leading figures who are purportedly libertarians – including Boris Johnson, Liz Truss and Dominic Raab, and which features a chancellor, Rishi Sunak, whose instincts are pro-free market and who sees more clearly than anyone else in government the economic damage done by lockdown policies. And yet it has presided over an unprecedented assault on our liberties in the name of keeping us safe.

 

At least some of these restrictions may be justified if they really are temporary measures to deal with a genuine public health emergency. But will they be temporary? “When will we return to normal?” and “when will we get our freedoms back?” are now the plaintive cries of many people in this country. The answer is: not any time soon. But not everyone is clamouring for freedom. I find it depressing how many people are prepared to accept the trade-off of personal liberty for a spurious government guarantee of “safety”. Covid will cast a very long shadow on our economy, on our way of life and on our personal liberties. 

 

Now that we have an effective vaccination policy in place, we need to reopen the economy and return to economic conservatism and to the central importance of personal liberty. Let me suggest a working definition of “economic conservatism”. An economic conservative is simply someone who believes in limits. Limits to how much government should tax and spend; limits to how much government borrows; and a limit to how much fantasy money central banks should create so governments can avoid telling their electorates that we must adjust to living within our means, not beyond them. In short, economic conservatives believe in a return to “sound money”. In a world of fiat currencies, where most money is created by a fractional reserve banking system, we can’t afford to continue treating money as if it were a form of magic.

 

A government that prizes personal liberty must also impose limits. Limits on collective action, limits to the power of the state, limits to the excesses of the public health succubus that has attached itself to policy making and seeks to conflate its efforts to control our lives with the heroic efforts of doctors and nurses to save lives. 

 

Government has taken cover behind public health experts to avoid blame for decisions that might go wrong. “Led by the science” is a mantra of ass-covering blame-avoidance. We need a return to economic conservatism and a reassertion of the values of personal liberty and we won’t get these things if we don’t fight for them. We must keep up pressure on government not to depart from the roadmap – enough is enough.

 

The Lamb on Holloway Road in north London is, outwardly, no different to many of the other 45,000 pubs up and down the country that welcomed customers into their premises for the first time in many months on 17 May. But it doesn’t take too much scratching below the surface to find that just like all these other pubs, it very much has its own story to tell.

It’s been telling it for the past year or so in all its gory detail on a pretty active Twitter account. It’s been possible to follow its ups and downs over these tumultuous months when it has clearly been fighting for its survival. Its activities have included the hosting of a Kickstarter-type fundraising effort that brought in £15,000 from its regulars to help it keep the wolf from The Lamb’s door.

An incredibly gloomy, wet early evening could not darken or dampen the pleasure of landlord Ade Clarke as he welcomed back many of his regulars – who he’d not seen for some time. He seemed genuinely taken aback that he was pretty much fully booked up for the evening with all his well-spaced tables taken. It was clear that for The Lamb’s drinkers who had ventured out that night – like many other people across the country – they very much regard the pub as so much more than just a place to go for a drink. 

It was also clear that not only does it provide this home-from-home for its clientele but it also supports a whole infrastructure around it. On my visit to The Lamb, I was served by a very capable member of the team who nervously admitted it was her first shift. So many other young people like her rely on such roles to help them build their confidence in the workplace and contribute to nurturing their independence. 

While soaking up the ambience of being back in a dimly lit environment with friends, I could hear the soft tones of traditional Irish music emanating from the corner of the bar, rising above the regular bar room chatter. Like many such musicians this was, no doubt, the first time they’d been able to perform in public for some time and they also represented another strand of life that relies on the support of pubs like The Lamb. 

My experience was lifted greatly by being able to enjoy my first pints of cask ale for some time – from local small craft brewers including the Three Sods in East London – and also beers from the Essex-based Leigh on Sea Brewery. Like many such businesses that focus predominantly on the on-trade they have been waiting for freehouses like The Lamb to begin trading again so they could get themselves back on their feet. 

As many as 40 of the UK’s 2,000 small craft brewers have been forced to close due to covid-19, and the survivors have built up debts to an average level of £30,000, according to the Society of Independent Brewers. So while The Lamb will be fighting hard to resurrect its business, it also has many others reliant on its success for their own return to profitable trading.

While Ade can hopefully now begin to rebuild The Lamb, our thoughts turn to the 2,000 pubs that still remain closed because they are too small to trade safely under the current guidelines. They have to hold out until – hopefully – they can begin trading again on 21 June. When they do, it will not only be themselves and their loyal customers who will finally be able to breathe a massive sigh of relief but all those small suppliers that rely on these pubs’ custom for their own survival, the bar staff who need them for their incomes and the musicians who need a platform from which they can spread a little happiness.

Now the majority of the sector has the chance to reopen, attention will return to bolstering trading levels, managing supply chains and tackling staffing challenges. But front of mind has to be the need to review and repair balance sheets. Operators have used multiple strategies to survive the pandemic and pulled many different levers to help plug the liquidity gap, but many balance sheets are stretched due to the trading liabilities and debt accrued. These over-indebted balance sheets may restrict operators’ ability to grow as fast as they would want to as the market bounces back. 

The estimated total of unpaid rent for UK commercial property by June 2021 stands at £7bn alone, while the combined total from the Coronavirus Business Interruption Loan Scheme (CBILS) and the Coronavirus Large Business Interruption Loan Scheme (CLBILS) stands at about £27.3bn. With the sector now moving along the reopening roadmap, the focus must be delivering on a plan that reduces levels of indebtedness and starts to repair pandemic-related balance sheet damage.

Lenders have been incredibly patient to this point but now businesses are reopening, operators must demonstrate how they plan to get back to more sustainable debt levels. Clearly, articulating this plan will be critical in order to keep lenders on board and supportive. 

The good news is share prices are back to pre-pandemic levels and we are seeing renewed investor interest in the sector. This interest is being driven by the consistent evidence of pent-up demand, reduced competition and the potential for more advantageous property deals. There is a breadth and variety of funding sources available, so operators need to identify what they want from any new funding to ensure they access the right pocket of capital to return to a sustainable balance sheet position. That new money might be new equity, junior debt, mezzanine – anything other than senior debt, which needs to be reduced to get the balance sheet on to a more stable footing. 

Facing the challenge of deleveraging, we believe businesses should implement as much self-help as they can – ensuring they are maximising opportunities to generate cash and boost profitability. By taking these measures, they can both reduce the absolute funding need and increase the debt capacity of the business. Achieving these two goals increases the confidence of securing support from existing funders or securing new money at the lowest possible cost and on the best terms.

Options to generate cash include improving working capital or pursuing selected site disposals, as we have seen from some of the pub groups. Taking a long hard look at where capex is deployed, and which opportunities are available to save costs on refurbishments to optimise return on investment, will also be helpful.

Operators have been looking hard at their cost base through the pandemic in terms of avoiding costs where possible. As the business reopens, focus will turn to operational efficiency in areas such as staffing, procurement, supply chain and central overheads. The aim being to try to at least maintain margins as business builds back, which will likely require improvements to be made in the face of cost inflation in certain areas. The enforced shutdown has provided opportunities to change ways of working and simplify operations to take cost out. 

Understanding what the opportunities are for self-help before engaging with current stakeholders or before going into the market to raise new money, is important to maximise your chance of success and to secure the best terms.

There also needs to be consideration of what the opportunities exist to accelerate growth if more capital is available. It may well be that we are entering into a period where the return on investment you will get from new sites or refurbishment of existing sites will be outsized because of favourable market conditions in terms of reduced competition and more favourable property terms. What operators don’t want is to miss out because their balance sheet is too stretched. There are genuine prospects to accelerate growth during this period through opportunistic expansion or acquisitions, and this should be part of the conversation with stakeholders.

Once all of the noise around reopening has quietened down, and if the sector is back trading fully from 21 June, we expect the mood music will begin to change and lenders will want to see a clear plan to reduce debt levels. For proactive businesses that implement self-help measures to boost cash and profitability, the presence of significant liquidity in the financing markets means they can secure the support they need and even access funds to support further growth. For those businesses that don’t, there is a risk that the interests of shareholders and lenders diverge and there will be a need for a more fundamental refinancing or even a sale to ensure the lenders are repaid. 

It’s time to get on the front foot to make sure you’re in the best position possible to ride the wave of the market recovery. 

Indoor trading resuming this week marks an important psychological step for the sector as operators can, quite literally, welcome customers back in from the cold. But the fact remains for a large proportion of operators it won’t be a profitable reopening until, hopefully, restrictions are fully removed next month. During this period, every penny counts, especially for independent restaurateurs and smaller operators who have been among the hardest hit throughout the pandemic.

 

During the past few weeks as the sector has emerged from closure, customer pre-booking has rocketed. Recent CGA data found almost three quarters of those who went out during the first week had reserved tables before doing so. Demand for dining out has been booming, with reservation platform The Fork (formerly Bookatable) revealing bookings are up 28% compared with last summer’s reopening after the first national lockdown. 

 

This clamour to return to hospitality has also, unfortunately, brought out some maverick customer behaviour, such as booking multiple venues in advance and choosing which one to attend on the day or skipping some of them. While the majority do the right thing and cancel their reservations ahead of time, about one in 12 admitted to being a no-show. I was struck by the tale of one Italian restaurant in Liverpool with only ten tables outside, all of which had been booked in advance for when restrictions eased, only for two groups not to show up one day, leaving a fifth of the tables empty during a key lunch sitting.

 

No-shows are a huge problem for hospitality even at the best of times – one figure puts it costing the sector up to £16bn a year – a staggering statistic. While they have always been a thorn in operators’ sides, they now present a significant operational challenge for struggling pubs and restaurants trying to balance limited capacity with high consumer demand. While the unpredictable British weather and cold conditions are likely to blame for some of the recent occurrences, the current fragile state of the sector means they are potentially more damaging than ever before. 

 

A campaign last summer, which is resurfacing now, seeks to highlight the damage caused by no-shows. It was supported by a number of high-profile chefs and other figures across their various platforms and it’s something we should all be championing and driving awareness of. Generally, operators just want three things to happen: for customers to be nice to staff, to pay their bill, and to turn up for their booking – or at least let venues know if they can’t make it.

 

Reducing the frequency of no-shows will help bolster the sector’s recovery and help safeguard the future of more businesses. While it’s wishful thinking to believe we can eradicate the problem entirely, there are certainly some practices operators can put in place to mitigate the issue. Appealing to a customer’s good nature might sound a little trite but what of the alternative? The debate about charging customers a deposit or no-show fee at the point of booking was raging long before covid reared its ugly head. On the face it, this practice makes sense but many venues are naturally reluctant to go down this path, fearing it will deter bookings completely. My view is that it’s important that operators, especially independents who will likely feel a greater impact from each and every no-show, do what is right for them. If they’ve been burned particularly badly in the past then it’s more justifiable to bring in a deposit scheme. 

 

Now is the time to champion a new way of tackling this issue and normalise the idea of guests paying deposits. Maintaining proactive customer communication through emails and on-the-day call backs is good practice, but there will still be people who don’t turn up. Having tech that enables people to update and cancel their bookings online, removing any potential embarrassment or awkwardness, can also help. But I’d like to see the industry, as a whole, make more noise on highlighting the damaging impact it has on businesses. 

Independent operators are the backbone of the eating-out sector; they support local producers and suppliers and are a hotbed for dynamism and innovative cuisine. While there is no one-size-fits-all approach to solving this problem, they deserve better from their customers.