Lease Out to Help Out: Option 101 for Rachel Reeves

It’s reported that Chancellor Rachel Reeves is weighing up a hundred different measures ahead of the Budget on 26 November.  Well, here’s option 101: ‘Lease out to Help Out’.

The ‘Lease Out to Help Out’ option would be a (less controversial) successor to the pandemic’s ‘Eat Out to Help Out’ scheme, for the hospitality sector and maybe other sectors too.

Rishi Sunak’s Eat Out to Help Out scheme in August 2020, which aimed to protect jobs in the hospitality sector during the pandemic, provided a state-backed 50% discount for up to £10 per person covering 160 million meals in August 2020.  Although blamed by some for the spread of Covid, it was high-profile and welcomed by industry body UK Hospitality.

Roll forward five years, and the difficult conditions across the hospitality industry will be familiar to lessors.  The latest survey of the industry (from sector bodies UK Hospitality, the British Institute of Innkeeping, the British Beer & Pub Association, and Hospitality Ulster) has found that one-third of hospitality businesses are now operating at a loss. Six in 10 businesses have cut jobs.  

For many hospitality businesses to survive and prosper they need to invest to increase the productivity of their staff. Yet over half of operators said they have been forced to cancel investment, the industry survey showed. Additionally, many finance companies struggle to lend to this relatively high-risk sector.

For restaurants, investments that might facilitate productivity improvements include self-service ordering kiosks, kitchen display systems, and kitchen automation such as intelligent automated fryers or robotic food handling. For hotels, additional options include check-in terminals, robotic floor cleaners and smart laundry solutions. 

Additional investments relevant to most hospitality businesses include more efficient heating, cooling and lighting solutions, online reservation systems, and AI-enabled operations management systems.

There is certainly no one-size-fits-all technology solution. Self-service ordering kiosks or kitchen automation are unlikely to fit with higher quality establishments.

This is also far from a panacea to the issues faced by the industry, and I know many in the industry would want to prioritise other issues including rates, energy prices, VAT, food production and training. 

There might also be an argument that reducing the staffing needs in the sector will just lead to more unemployment and higher benefits bills.

Yet on a day-to-day level, don’t many of us see our local venues struggling, and think there must be some way that investment could help?  So in parallel to any other changes that the hospitality industry might be calling for, it seems the right time to propose a specific scheme for supporting new productivity-related investment:  A ‘Lease Out to Help Out’ scheme.  

What sector other than asset finance can say that every £ pound of support will directly boost long-term productivity and service quality, as well as often improving sustainability.

Government support is needed to help hospitality businesses to invest in productivity, but it need not come at a huge expense to the taxpayer. A risk sharing scheme, like that offered by the European Investment Bank (EIB)  that reimburses financial institutions for up to 50% of principal losses on a portfolio of eligible assets in return for a fee could provide highly targeted support enabling increased lending. 

Eligibility could be based on the use of proven technologies, with equipment and technology suppliers participating in the risk-sharing arrangements. Lenders could be eligible based on their own in-house sector expertise, alongside the expertise of specialist hospitality asset finance brokers.

‘Lease Out to Help Out’ could be a bold and innovative way of supporting small and medium-sized businesses, including but not limited to the hospitality industry, to adapt to the more difficult economic environment, changing how services are offered to improve productivity, quality and sustainability.  

On other potential Budget topics, here's a link to my earlier piece on Motability, where I suggest using Motability to help even more households to obtain affordable mobility, whether they include disabled people, or are low-income households who need cars for access to schools and work (but, at the same time, possibly focusing tax support on low-emissions used vehicles): https://www.assetfinancepolicy.co.uk/post/forward-gear-the-adam-smith-institute-s-reverse-gear-analysis-of-motability-takes-us-in-the-wron