Editorial

75% of nightlife venues face bankruptcy without rent solution MPs warned

• 24th May 2021

The Night Time Industries Association (NTIA), a trade body of nightclubs, bars, music and entertainment venues, has today urged the Government to provide a solution to the £2.5 billion rent crisis facing nightlife operators as a result of the Covid-19 pandemic. Spiralling rent arrears, MPs have been warned, threatens to bankrupt 75% of commercial tenants in the sector following the ‘cliff edge’ end of the Government’s rent moratorium in July.

Speaking yesterday to a panel of twenty parliamentarians in the All-Party Parliamentary Group for the Night Time Economy, the NTIA warned that this debt crisis requires immediate intervention from the Government and will, if not resolved, result in hundreds and thousands of job losses.

Today, in a written plea to Government, the trade body expressed frustration that postponing the issue with a short-term reprieve from evictions has been short-sighted and perfunctory, with no real understanding of the generational debt legacy wrought by Covid-19.

Large swathes of the nightlife sector have been closed since March 2020 with no meaningful opportunity to open and trade. As a result, businesses have been unable to pay rental arrears, through no fault of their own, and have accrued considerable debts. While the Government put in place a moratorium on evictions in March 2020, this is due to expire on June 30th, and the prospect of repaying these debts, for most in the sector, is largely unattainable.

The letter contains the findings from a new survey of 360 corporate and SME businesses across the UK, which revealed the scale of the crisis. The survey found:

• 80% of commercial tenants are still facing unproductive discussions with their landlords.
• 75% of commercial tenants will be forced to look at insolvency or restructuring if further support is not provided post the rent moratorium.
• 93% of commercial tenants have encountered substantial job losses and 70% believe there will be further redundancies post-moratorium.
• 92% of commercial tenants are in favour of an Australian Rent Model, featuring a shared burden between tenants and landlords.

An inquiry by All-Party Parliamentary Group for the Night Time Economy earlier this year found that 72% of impacted businesses were over two quarters behind on payments, including over half of nightclubs, and 32% of live music venues now three quarters in arrears. As the Government prepares to remove the forfeiture moratorium, commercial landlords will once again be able to evict operators in the sector and this, the NTIA warn, will cost jobs and livelihoods, hamper the wider economy, and waste the public money spent on supporting these venues to date.

The NTIA have proposed a ‘shared burden’ solution which would see tenants, landlords and Government contribute towards rental arrears to avoid mass evictions and a race-to-the-bottom amongst prospective landlords for the leasing of premises, alongside an extension of protections to allow businesses to regenerate. The Ministry of Housing, Communities and Local Government have held a consultation on this issue but are yet to put forward any policy proposals.

Michael Kill, Chief Executive of the NTIA, says:
“Time is not on our side and business owners are continuing to take on further rent debt throughout this period of restrictions; this will inevitably compromise their future and the regeneration of the industry. This needs urgent Government intervention and will require the Government to bring forward a policy that allows tenants, landlords, and government to share the burden of debt from rent arrears.”

“Consideration must be given to a more robust code of conduct or adjudication process, which will require some mandatory or legislative elements within it, to ensure that everyone comes to the table to resolve this appalling situation we find ourselves in. We must avoid this cliff edge.”

Jeff Smith MP, Labour MP for Manchester Withington and Co-Chair of the All-Party Parliamentary Group for the Night-Time Economy, says:
“The experiences and stories that parliamentarians heard yesterday were truly worrying. The testimony revealed a dire crisis in this sector compounded by widespread anxiety and real human costs. Operators, small and large, are battling increased financial uncertainty and, without a rent debt solution, could face the very real prospect of re-opening on the 21stof June, only to be bankrupt by July.”

“The Government needs to urgently consider potential solutions, such as a shared burden model, and loans to enable longer-term debt restructuring. I would welcome the opportunity to work with the Government towards a solution that helps steer these businesses out of the precarious position they find themselves in.”

Peter Marks, Chief Executive, REKOM UK, operators of 42 UK nightclubs, says:
“We have always recognised that landlords are victims alongside us operators in the Covid world, but to have full reparations even over time would shift all the cost on to beleaguered operators, many of whom would simply not survive, rendering any public money spent on support wasted. And many landlords will not engage unless they are forced to by the Government, we have seen plenty of evidence of that across the sector.”

Aaron Mellor, Chief Executive, Tokyo Industries, operators of 32 UK clubs, bars and festivals, says:
“The pressure now is for UK Government to legislate on sector-specific rent arrears, unlike any other sector nightclubs have been prevented from legal operation since March 2020. Whilst, of course, we understand the public health reasons why we can not be expected to take the full rent burden alone while receiving no income.”

“Commercial leases already consider ‘suspension of rent’ clauses, where a property is not occupiable for insured or uninsured losses, this clause could be easily adapted by statute, a sharing of loss between landlord and tenant for the entire sectors onward protection. Mandatory 50% rent waivers for the affected period are needed. Codes of conduct do not work with institutional landlords.” 

Peter Hunter, Botanical Garden Pub, Liverpool says:
“The variance in how landlords are approaching the current rent fees, proposed increases and also rent debt, is mammoth and includes a lot of them just pretending that the pandemic hasn’t happened and that they are due large rents based on a very different economic landscape from what we’ve experienced and are going to experience.”

“One constant push-back in many conversations is landlords’ understanding of the grants: they put themselves as the front of the queue because in their minds without the brick and mortar there is no business.”

“A stronger framework is needed for how these conversations are driven, otherwise you will see smaller independents, who are crucial bellwethers for the industry, close for good. This will have a devastating effect.”

Martin Whelan, Tollington Arms, London says:
“The most frustrating part of this argument with Private Landlords regarding the rental arrears accrued I find is them being so short sighted in that, if they don’t come to the table to negotiate and continue using bullying tactics such as my Landlords are using against myself , no tenant whatsoever will  put their neck, further on the line, to go borrow finance to rebuild their businesses… why would they ??”

“This is why Brewery Bosses such as GK, Punch have “seen the light”, and are giving tenants the adequate Rental Forgiveness they require because the breweries now acknowledge themselves, without tenants in situ in their outlets, they don’t have a business either… that is the reason why most agreements are called partnerships”

“We need each other. Otherwise “the whole house of cards,” capsizes.”