Foodservice and hospitality suppliers need more support, finds report

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Governments are being urged to give more support to businesses that supply the hospitality and foodservice markets.

More than 20 trade groups, including the Federation of Bakers and the British Sandwich Association, have endorsed a new report that claims some businesses, described as the “squeezed middle”, have not been given the same level of government assistance as those they supply, despite being hit hard by lockdown.

According to the report, those struggling most to cope are food and drink manufacturers focused primarily on the hospitality and foodservice sectors; and those that supply retail as well as hospitality and foodservice, but cannot repurpose between the two.

Research undertaken for the report – Maintaining Post-Covid-19 Capacity in Hospitality and Food Service Supply Chain Businesses: The Squeezed Middle – shows that less than half of food and drink manufacturers have applied for support from the Coronavirus Business Interruption Loan Scheme or Bounce Back Loan Scheme.

The main reasons given for this were concerns over incurring additional debt and associated interest payments. Researchers also found many companies were facing up to half their customer base delaying payment or not paying outstanding invoices.

Separate research conducted by British Baker last month found that only 14% of bakery businesses had applied for a Bounce Back Loan and 8% for the Coronavirus Business Interruption Loan Scheme. A third of all respondents had not sought additional funding.

The new report outlined a series of steps government could introduce to support businesses:

Businesses supplying into the hospitality and foodservice industries should continue to receive furlough support through the UK government at a rate of 80% of salary contribution until those markets return to commercially viable levels.
The UK government should place a requirement on the trade credit insurance industry to develop best-practice rules of operation that include greater transparency and formal notification of the reason(s) for refusal or withdrawal of cover.
Insurers should be required to reinstate reduced or withdrawn cover backdated to 1 March 2020, except where there are clear and identifiable reasons as to why this would no longer be appropriate.
Government should provide more targeted support for the ‘squeezed middle’ that does not incur additional business debt – for example, a relaxation of current rules for Apprenticeship Levy funds to allow businesses to maintain existing employment.
Government should create schemes for small, medium and micro businesses within the ‘squeezed middle’ that provide initial cashflow injections to businesses requiring support to secure orders for materials and/or build stock in readiness for the recovery of customer demand.

“Throughout the pandemic, the food and drink industry’s hidden heroes have been working hard to keep the country fed,” said Food and Drink Federation chief executive Ian Wright.

“But those companies who supply the foodservice and hospitality sectors have seen their business disappear overnight, and yet have not been afforded the same government assistance.

“The hospitality and foodservice sectors will play a vital role in contributing to the UK’s economic recovery, but any restart with be stymied without further support for those food and drink manufacturers operating in the squeezed middle.”

The following organisations have endorsed the new report: