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Summary
- Government announced a series of new restriction to contain the spread of the Coronavirus
- Prime Minister has warned that if the R rate does not go below 1, then tighter restrictions can follow
- All businesses selling food or drink along with re-creation venues need to remain closed from 10 PM to 5 AM
- The hospitality sector is going to be impacted badly with the new restrictions, resulting in many more job losses
Prime minister Boris Johnson has revealed a series of new restrictions to be implemented from Thursday, 24 September 2020, saying that the likelihood of a second wave was real. PM warned that the country had to act now to avoid grimmer consequences later and said that if the actions failed to bring the R rate below 1, then it could result in even tighter restrictions.
The measures to tackle rising cases of Coronavirus from 24 September 2020 include-
- Washing hands regularly
- Covering face in enclosed spaces, especially where social distancing is not sufficient
- Wearing visors and face coverings in close contact services will now become law
- Businesses to prominently show the official NHS QR code posters
- All businesses selling food or drink, Social clubs, casinos, bowling alleys, amusement arcades, funfairs, theme parks, adventure parks and activities, and bingo halls, need to remain closed 10 PM to 5 AM. However, the delivery services can continue after 10 PM
- All pubs, bars and restaurants will be restricted to table service only (food and drink must be ordered from, and served at, a table)
- Support groups can have a maximum of 15 people
- A cap of 15 people on weddings, receptions, and civil partnership ceremonies
- Penalties for not wearing masks or breaking the “rule of six” has been increased to £200 from previous applicable £100
Hospitality is the sector which has been under severe stress and is going to feel the heat most with the new restrictions in place. There already dwindling business is going to get impacted, and the economy would consequently see more job losses. The Prime Minister’s announcement coincided with huge job redundancy announcements by the major hospitality companies.
Whitbread Plc
Whitbread Plc (LON:WTB) one of the largest hospitality chains of the country and the owner of famous Beefeater, Brewers Fayre and the Premier Inn brand, in its operational review update, stated that it could be going for up to 6,000 redundancies, due to weak business conditions.
The company’s total sales for the first half were considerably lower year-on-year, as most of its hotels and restaurants remained closed for a large part of the period. Segment wise, the accommodation UK like-for-like sales slumped by 78.2 per cent in H1, while the Food & beverage sales were lower by 76.6 per cent.
Though there was some improvement since reopening, and total UK accommodation sales growth were better than expectation, aided by the fast reopening and followed by the “Eat out to help out” Scheme.
The company had seen good improvement in the first two weeks of September, which remained better than expectation, though the two months of September and October are usually a period when business bookings pick-up after the quiet summer period and the company was expecting further improvement, but the latest restrictions are undoubtedly going to mar the prospect.
The company is completing a process that will result in a reduction of the head office headcount by approximately 15-20 per cent, around 6,000 in total. The majority of the redundancies of around 4,500 will be from its Premier Inn budget hotel chain, while rest of around 1,500 will be at Beefeater and Brewers Fayre chains, effective from the month of November.
On 23 September 2020, the stock of the company was trading at GBX 2,109.00 (10:116 AM GMT+1), up by 6.00 points or 2.98 per cent from its previous closing. It has given a negative return of 53.68 per cent for the year and 58.15 per cent on a YTD basis. The company was having a market capitalization of 4,135 million, while its TTM PE stood at 15.27x.
(Source- EODHD/Others, Thomson Reuters)
JD Wetherspoon
Whitbread is not the only hospitality major whose redundancies announcement coincided with the government new restriction, but one another major name of the sector JD Wetherspoon (LON: JDW), a well-known name in the pubs business, operating over 900 pubs in the country, has also announced that it will go for job cuts of around 450 staffs at its six airport pubs.
Pubs have long been blamed for the resurgence of the Coronavirus and were the reason for local lockdowns recently. However, pub owners deny this theory saying that there is no proven evidence of this. Tim Martin, Chairman of the JD Wetherspoon, on this issue had even called the government being “out of touch and out of control”.
The pub chain, with the continuously declining sales, has decided to cut almost half of its workforce at Glasgow, Gatwick, Birmingham, Heathrow, Edinburgh and Stansted airports.
On 23 September 2020, the stock of the company was trading at GBX 809.50 (10:16 AM GMT+1), up by 24.50 points or 2.97 per cent from its previous closing. It has given a negative return of 49.06 per cent for the year and 53.22 per cent on a YTD basis. The company was having a market capitalization of 945.00 million, while its TTM PE stood at 13.53x.
(Source- EODHD/Others, Thomson Reuters)
The hospitality sector has been struggling since the outbreak of the Coronavirus, while at the government has been strict to them since the beginning, the patrons have lacked confidence, turning out to be a double whammy for them. The new restrictions, especially the curfew of 10 PM to 5 AM is undoubtedly going to hurt them the most; it is being estimated that more than 37,600 pubs will be affected by the curfew, pushing hundreds of pubs and bars out of business and would lead to thousands of job losses.
