Interview with Luke Johnson - Resolve Group UK

Interview with Luke Johnson

Luke Johnson

Interview with Luke Johnson

Cameron Gunn interviewed Luke Johnson, entrepreneur, about the effects of the Covid-19 pandemic on the hospitality sector and his thoughts for the future.

Luke is Chairman of Risk Capital Partners, and a former chairman of the Pizza Express chain, the Royal Society of Arts and Channel 4.

Given the current extraordinary circumstances what do you consider to be the main challenges facing the retail hospitality sector?

Short term it is about reopening while coping with new social distancing rules.

Longer term it may be that consumer habits have shifted away from physical retail  towards e-commerce so the traditional store based model with relatively high fixed occupation costs may no longer be viable in many locations. For principally shop based retail that is the big challenge in the longer term.

Additionally if, as I suspect, the UK is now in recession that will affect the economy and levels of consumer spending generally.

Do you think the Government has done enough to support the hospitality sector at this time, and what more could they do?

I think the Government has been pretty unhelpful generally.

They have introduced the furlough scheme which has supported jobs, and they have given a year’s holiday from business rates and CBILS loans. However, they have introduced a two metre social distancing rule which I think is excessive, compared with France and according to WHO a one metre rule is standard and sufficient and I believe that to be the case.

The Government have scared the nation with apocalyptic publicity as regards this disease, admittedly supported by the media, which is why we appear to be virtually the most frightened nation in the world as regards ending lockdown, and in making lockdown itself a strategic response to the pandemic.

Extending it for as long as they have is excessive and is a product partly of them frightening the citizenry and being, therefore, unwilling to re-open businesses, schools and allowing pubs and restaurants to open.

It seems 4th July is notionally the date on which hospitality businesses will be able to trade and is too slow, they should be able to open now; it is very damaging for the viability of the industry going forwards. Every week liabilities are accumulating and it becomes harder to coax people back to work, to persuade customers to eat and drink out again which means that there is an ever growing pile of liabilities accumulating that will need to be dealt with when they do re-open, so I don’t think the Government has played it very well as far as the hospitality industry is concerned.

In addition to which the rules regarding a two week quarantine for overseas travel means that in-bound tourism is practically dead which is again harmful.

What do you think will be the lasting impact on the hospitality sector given the potential length of lockdown?

 It is very difficult to say, I don’t think we will realise until certainly the end of the summer and probably not until the end of the year. Hundreds, if not thousands, of restaurants, pubs and others will shut never to open again. Capacity will be eliminated, many businesses will go bankrupt, thousands of employees will lose their jobs and it will be very damaging indeed.

What innovative initiatives have you seen implemented that are succeeding in helping hospitality businesses currently experiencing difficulties?

A lot of operators are offering take away alternatives, whether this is financially viable is another question. It keeps people busy, it keeps the brand alive, it brings in a little income and I think it is better than sitting at home despairing but whether actually it is making a material difference I doubt for many and obviously it is not a long term substitute for cafes, pubs and restaurants whose primary business is eat in. It is desperate and very sad.

It does, however, show the willingness of entrepreneurs to do anything to stay alive and to adapt but it feels in some respects rather pathetic because of the ludicrous restrictions.

What advice would you give to the owners of restaurants and bars to help them until lockdown ends?

Depending upon their financial situation I think they should be preparing to take very tough decisions such as considering doing an administration and a pre-pack. For many that may be the only way they can continue to trade albeit going through some sort of insolvency.

They need to be realistic about the accumulating liabilities and the level of business they will be able to do after re-launch under social distancing and given people may have less discretionary spending power and still feeling at risk depending upon their business model,  where they are located and the demographic they appeal to. For many who don’t have significant resources a form of insolvency may be the better solution and they need to take advice and work out how they manage that.

How do you envisage the hospitality industry coming back to life after lockdown? What might the ‘new normal’ look like?

The ‘new normal’ is going to be a very battered hospitality sector. The sector is huge, it is worth over £100 billion, so is not going to disappear overnight but up to 10 – 15% might sadly be eliminated permanently with tragically so many jobs lost. Those that remain will be doing lower levels of trade and employing fewer people. It’s not just the retail operators but also the supply chains will be the walking wounded because obviously with fewer customers, and many of their customers not having paid their bills, the wholesalers themselves may also go bankrupt.

It will be a damaged sector but the resilience of entrepreneurs and business founders knows no bounds and I do believe that long term people that have enjoyed going out for a drink or a bite to eat for hundreds of years will in due course return to the pub or the local restaurant. It’s too easy to think that habits which have been established over many generations will suddenly end, people will eventually get tired of being at home and will want to go out to celebrate special events and to socialise which is an important part of being human.  So I am confident that those behaviours won’t disappear but the capacity will be reduced and prices might increase due to inflation, possibly menus will be adjusted or reduce. Some people simply won’t be able to afford to eat out due to higher unemployment and lack of economic confidence.

However, things go in cycles in societies and cultures and whilst we are in a dark time at the moment, things will recover.

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