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Fri 7th May 2021 - Friday Opinion
Subjects: The challenge of allergens, reasons to be joyful, appeal of the capital is returning, essential fairness points the way towards landlord and tenants sharing the pain
Authors: Simon Wilkinson, Paul Chase, Glynn Davis, Nigel Ball

The challenge of allergens by Simon Wilkinson

During the past 12 months, significant change has taken place within the hospitality business due to covid-19, the most profound change in relation to the proposal regarding Owen’s Law, has been the acceleration of digital and technological advancements. Predominantly physical menus have disappeared due to the threat of cross-contamination and have been replaced with QR codes, digital and screen ordering technologies. I predict physical menus will not exist within a short period of time except for, perhaps, fine-dining restaurants. Quick service restaurants are now 100% digital order and pay, and the rest of the sector is moving that way very quickly. The younger generations demand order and pay-at-table technology, all accessible by their own personal smartphones, which means most conversations with waiting staff are eliminated. The relevance of this is that all allergy guides are now accessed digitally, which means the information is intricately linked to the menu by touch screen. You simply click on the allergy information tab and all the information is detailed and most technology then prompts you to confirm you have read the information prior to ordering.

My opinion, for what it is worth, supported by over 35 years of experience within hospitality, is that due to the speed of technological change, the allergens are now all linked to the menu – so the proposal from the family for Owen’s Law may not be the best route forward due to all the reasons I have articulated above. As I have always believed, adding symbols to the menu will not make dining out safer, firstly, because a dining-out experience allows the consumer to swap items such as toppings, sauces and accompaniments (unlike pre-packaged products), secondly, it would potentially reassure the consumer via a symbol rather than asking for the detail of an allergen guide and, thirdly, because there is so much information that needs to be provided, it would not fit on a menu. I suggested a slight change of direction, I would propose that Owen’s Law makes it compulsory for the allergen information tab on all digital ordering systems to be the first tab a consumer sees, and made compulsory, to be at the top of the page; likewise in the small cafes or in fine-dining restaurants where physical menus may still exist in a few years’ time, the notice that an allergen guide is available and must be read is at the top of the page – so it is the first thing a consumer sees. I passionately believe this is the way to protect lives in the future.

Byron complied with all legal requirements back in 2017 when the tragic, accidental death of Owen Carey occurred. The dish Owen ate was correctly labelled in the allergen guide as containing dairy, unfortunately, the guide was not requested at the time of ordering as evidenced during the coroner’s hearing. This was also the case with the Pret A Manager case that was in a Bristol court this week, where Pret was found not guilty because the food was also correctly labelled in its allergen guide. Even though this event happened two years before I was employed by Byron, I have personally taken the responsibility to improve all allergen procedures beyond legal requirements to an extent Owen’s sister acknowledged in an interview on ITV that Byron was the safest place to eat on the high street. I have also raised awareness within the industry and the public domain to try to educate that responsibility rests with three parties: the company to provide a detailed allergen guide and train its employees to follow the correct processes, the guest to request to see the guide at the point of ordering and the employees to be trained in the correct procedures when a guest alerts them to any allergies.

I wrote to Owen’s family in September 2019 and received a response last week on 27 April 2021, which I responded to on Tuesday morning. I am very supportive of any improvements or changes that can be made across the industry to prevent further tragic, accidental deaths from occurring and have offered to work with the family accordingly. In my letter to them, I have asked them to consider/tweak their approach to Owen’s Law because I believe my suggestions will minimise the occurrence of any further accidental deaths.
Simon Wilkinson is chief executive of Byron

Reasons to be joyful by Paul Chase

It’s difficult to think of any – reasons to be joyful – that is. So, please regard the title to this piece as an expression of irony, if not despair. I find little to be optimistic about at present for the hospitality industry or our country. 
 
Let us just survey the landscape:
 
If there was one aspect of our society I still had some faith in, it was the impartiality and independence of our senior judiciary. That is hard to maintain in the wake of the disgraceful shenanigans we’ve witnessed in relation to the brave attempt by Hugh Osmond and Sacha Lord to challenge the government in court. They asked the government to provide the evidence that justified it delaying reopening pubs and bars inside until 17 May. Government delays, a refusal to mediate and then, mysteriously, a judge couldn’t be found for a fortnight to hear the case – so, in the end, the judge ruled that hearing the case would be “academic” as the 17 May was almost upon us. How convenient. It’s almost as if the old boys’ network was in operation here and the judiciary co-operated with government in timing this case out. And then the government sneaked out a report confirming that licensed premises were responsible for only a tiny fraction of covid transmission – something they never produced in evidence to the court. What a disgraceful abuse of process.
 
More generally for hospitality, we’re facing formidable headwinds when we are allowed to reopen fully. The issue of rent hangs over the industry like the Sword of Damocles and we can only hope that trade body efforts to get the government to act to prevent this catastrophe unfolding will be successful. Then we also face labour shortages. Mitchells & Butlers has lost 9,000 of its 39,000 staff since last year; D&D, the owner of more than 40 upmarket restaurants, is looking for up to 400 recruits for its total UK workforce of 1,300; and PizzaExpress is looking for 1,000 staff. 
 
Staff challenges are particularly acute in the south east of England and London as a lack of supply of skilled people from the EU, post-Brexit, is causing issues – particularly with recruiting kitchen staff. More than 30% of hospitality staff across the UK came from Europe pre-Brexit but that rises to more than half of those employed in London. The combination of lockdown policies, government scapegoating of hospitality and the entirely predictable problems for staffing arising out of Brexit have created a perfect storm.
 
And what of the macro-economic environment we will be facing over the next two years? I’ve written previously about the risk of significant inflation arising out of the enormous monetary stimulus the government has introduced over the past year to support workers on furlough, the self-employed and help to businesses. Welcome though these measures have been in the short term, in the medium term they will, I believe, lead to a double-digit inflation in 12 to 18 months’ time. In round figures, government borrowing for 2020-21 will be about £300bn. Our national debt is now at a record £2.3tn – 103% of our annual GDP. Household savings have increased during the past year by £170bn – and there is a lot of pent-up demand once the population and the economy are released from restrictions.
 
What does this mean for inflation? So, by way of explanation, a bit of economic theory: in our economy, money is created via a fractional reserve banking system. The Bank of England (BoE) requires commercial banks to lodge a fraction, or percentage, of their deposits with them. This is known as the “fractional reserve percentage”, or sometimes simply as “base money”. Currently, the fractional reserve is 17%. So, banks must lodge 17% of their deposits with the BoE to keep them honest. The rest they can lend. Currently, 17% of money is lodged with the BoE, just 3% of money is in notes and coins, the other 80% of money is created digitally by private bank deposits that are driven by lending. 
 
So, when government drops a huge amount of money into people’s bank accounts via furlough schemes and their like, that money is saved or spent and re-spent and new deposits are created – thus stimulating a multiplier effect that generates spending power far in excess of the initial monetary stimulus. There is an equation economists use to calculate the multiplier effect, as follows:
 
Size of money stimulus multiplied by 1 divided by the Fractional Reserve Percentage = increase in Broad Money available for spending or saving.
 
To put some actual figures on this: £300bn x 1 divided by 17 x 100 divided by 1 = £1,764bn
 
In other words, an initial monetary stimulus from government of £300bn generates, via the multiplier effect, just over £1.7tn extra spending power sloshing around in the economy. Whether this leads to inflation depends on two things – the output gap and the velocity of exchange. The output gap refers to whether there is sufficient slack on the supply side to flex up to meet an increase in demand. I noted above some of the severe supply side restraints in terms of labour shortages and future business closures due to rent debt. The velocity of exchange refers to how quickly people spend all this extra money and I suspect people will want to do so.
 
This may look like good news for operators, but inflation will eventually have to be curbed by a rise in taxation and interest rates. Like I said – reasons to be joyful.
Paul Chase is director of Chase Consultancy and a leading industry commentator on alcohol and health
 

Appeal of the capital is returning by Glynn Davis

Wandering around central London over these past few weeks has reminded me a little of the run-up to the Olympics in 2012 when the capital underwent a major spruce up as investments were made in roadways and other core infrastructure in order to impress the world’s TV viewers and the influx of overseas visitors.
 
During a recent stroll down Regent Street, for instance, I found numerous large planters placed on widened pavements and many newly installed cycle ways across various parts of London that are massively helpful in ensuring the city becomes greener, more pedestrianised and, generally, a lot more liveable. 
 
This time it is the not only the overseas visitors that the capital will be looking to impress but also commuting office workers, returning EU nationals, and the many “Londoners” who have decamped to less urban locations or back to their families to see out covid-19. 
 
As well as the enhanced pathways and new cycle lanes, the closing of roads for hospitality is also greatly welcomed. It is hoped the continental vibe this move gives to central London will continue with the extension of road closures beyond the scheduled September end date.
 
To help this process of bringing London back to life, the mayor has launched a £6m campaign to encourage domestic and international tourists back to the capital by putting on various events that showcase the capital’s public spaces and its “cultural riches”. Such actions are a counter to a worrying – scaremongering – recent report from Ove Arup that was commissioned by the Greater London Authority. It suggested three scenarios, including one with tourist numbers not climbing back to 2019 levels until 2031, 100,000 jobs being at risk over the next two years, and a worst-case scenario of returning central London office workers reaching only 40% of pre-covid-19 levels.
 
This paints a near-apocalyptic picture but I’m simply not buying it. For instance, one of the key conclusions of the report is that more people need to live in central London. We’re already seeing evidence of the appeal of living in the capital return strongly. More super-prime homes were bought in the capital than in any other city in the world in 2020. The total was only 5% down on 2019, according to Knight Frank, which found New York sales fell a hefty 48% while in Hong Kong it was down 27%. Things have been picking up across the whole of London property market, as rental levels have dropped, with new lettings agreed in the central area for the three months to February jumping 17% compared with the same period the year before, according to LonRes.
 
But far more important is London’s pulling power to younger people who give it that much-needed vibrancy, vitality and disposable incomes that they are willing to spend on leisure and hospitality. Again, we have positive evidence here as real estate business JLL found 87% of the new tenancies in Zone 1 agreed over the past year have been signed by people aged 18 to 39 who have been taking advantage of the lower rent levels. This skew towards the younger demographic is compounded by the fact only 51% of central London residents fall into this age grouping.
 
London has always been a great place to live and work for young people, and this evidence supports my view that this will very much continue post-covid-19. The capital will also benefit from many more people returning to commuting into the city than is being forecasted. Having had zero office life for more than a year, it is all too easy to say things will never be the same again. Investors will know that for every inflated bubble market about to pop there will be myriad commentators and economists suggesting it is different this time. History has repeatedly shown it never is.
 
Yes, there will be the very welcome opportunity for more flexible working but much of the working patterns we had before will return because, despite some of the undoubted negative aspects to office life (ie. commuting), it does provide many upsides. That’s why it has remained in place for so long. Clearly, it would be wrong to say we will return to exactly what we had before but I feel there will be a whole lot more of the same than there will be differences – apart from more planters on wider pavements perhaps.
 
Certainly many of the characteristics typical of pre-covid-19 central London have been returning over the past few weeks, including some tentative returns to offices and growing numbers of people out and about enjoying the top-class eating and drinking establishments for which the city has rightly been renowned.
Glynn Davis is a leading commentator on retail trends
 

Essential fairness points the way towards landlord and tenants sharing the pain by Nigel Ball

The clock is ticking down to another disaster for the hospitality industry – I’m not talking about another wave of covid-19, but the end of the rent moratorium. However, with signs that both landlord and tenant representative bodies now agree on the principle of sharing the pain, a recent county court decision has pointed the government in the direction of an intervention that can provide of a fair solution for all.
 
The date of 30 June is weighing heavy on many hospitality businesses’ minds, particularly those that have suffered because of the extended period of enforced closure over the past year. Debts have been mounting up – according to UKHospitality unpaid rent is estimated to be in excess of £2.5bn across the sector. The government’s moratorium against forfeiture and some debt-related legal actions has given the sector much-needed breathing space. However, many businesses are understandably concerned about what will be their fate come 1 July – could they face a legal demand for payment and notice of eviction, ending their business’ recovery hopes so soon after being allowed to reopen?
 
Landlords themselves have also had to manage significant interruptions to their rental income, having to juggle their own fixed costs, including insurance and service charges, with obligations to their lenders. Industry bodies have expressed concern, in particular, that some well-capitalised businesses, including some retailers that have been able to remain open without restrictions throughout this crisis, have not engaged in good faith during this period.
 
The government’s call for evidence promises an intervention to protect jobs and livelihoods. Its consultation asked businesses to share evidence of what they would expect to happen under six scenarios. One option included the disaster scenario of no further intervention post 30 June; another simply kicked the can down the road with another short extension to measures for specific sectors impacted the worst by the pandemic; while the final option offered a binding non-judicial adjudication between landlords and tenants. But no option on its own is quite what the hospitality sector is looking for.
 
The government’s first option – to do nothing – could result in a demand for back rent to be paid all at once, which would be unfeasible for most businesses and achieve nothing apart from leave many landlords with a vacant unit and further delay until rent can be secured. It’s essential the moratorium is extended at least until the end of the year, to allow businesses that are only just restarting to trade to establish themselves again, and have a good few months of certainty behind them before they have to face their accrued debts. 
 
However, any solution to tackle the rent debt needs to acknowledge the elephant in the room; not all of this debt can or will be paid.
 
Interestingly, the responses from both landlord and tenant industry bodies demonstrate an element of agreement on a solution that may work. British Land and Landsec announced the stance they would be taking in partnership with the British Property Foundation (BPF), while UKHospitality’s proposals were highlighted in a letter to Robert Jenrick. Given the seemingly obvious conflict between the interests of both groups, it is perhaps surprising how many issues the two proposals actually agree on.
 
The BPF said it is “only right that the landlord, hospitality and retail sector share the pain”. It is proposing to ring-fence the debts since the beginning of the pandemic and encourage tenants and landlords to agree a way forward by the end of the year, with payments towards an agreed amount of debt expected to resume in 2022. To encourage agreement between the parties, it seeks a binding arbitration and suggests a benchmark of a 50% reduction in rent for those periods when business have been unable trade and are unable to pay.
 
UKHospitality’s call for “decisive government action” seeks an extension of the moratorium to the end of 2021 and proposes a binding adjudication process that aims to share the pain of closure with at least 50% of debt written off during the period of closure. It also seeks an expansion of the protections to include all enforcement activity such as CCJs, so as not to undermine negotiations.
 
These two proposals are similar to the recent judicial intervention by Richard Parkes QC who, at the end of March, handed down a judgment at county court on a pandemic clause being included in a new lease. The decision on the case between WH Smith Retail Holdings v Commerz Real Investmentgesellschaft ruled the lease in question should include a pandemic clause, and this clause would include a 50% reduction in rental payments should the business face enforced closure by government restrictions. In his ruling, the judge concluded “essential fairness demands” the inclusion of such a pandemic clause into new leases and agreed to this sensible rent reduction suggestion.
 
With consensus between industry bodies on both sides and judicial decisions already made, we are now only looking for government to agree what has already been set out before them: a binding adjudication should set this minimum benchmark for the outcome, while providing occupiers with an extension to the moratorium until the end of the year, while also instructing lenders to support landlords during these negotiations and protect them from any debt recovery action as well.
 
The only way the government can protect the interests, not only, of hospitality businesses but the high streets and the economy as a whole, is to share the pain between landlord, tenants and lenders because no one is immune from the impact of this pandemic and concessions have to be made across the board.
Nigel Ball is a director in Colliers licensed and leisure team

 
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