Nightclubs are facing a knife edge

If it was a competition to find which industry had suffered the most during lockdown it would be hard to make a case beyond the nightclubs.


Nightclubs are on a knife edge

Nightclubs

 

As well as the highly recognised slogan that they were the “first to close and the last to reopen” figures obtained from the Night Time Industries Association (NTIA) showed:

 

  • Only 21% of their members (including takeaways and other late night only operating businesses) are currently able to operate
  • Less than 5% of UK nightclubs have been able to reopen – and then only as bars
  • 73% of their members are in rent arrears by three quarters or more
  • 73.2% of their members have had to make staff redundant since the beginning of the first lockdown in March 2020
  • 44.6% of members have had to make over 60% of their workforce redundant
  • 75.7% of members said they will not survive for more than two more months without all lockdowns being suspended or further support provided

 

Michael Kill, CEO of the NTIA said: “These are desperate times for businesses across the night time economy, with many are still unsure about the measures that will be required to reopen from the 21st June. 

 

“While there is some confidence that some of our members will be open this year, the issue is to what degree, and with what restrictions in place as many of them feel that the Government will attempt to trade additional compliance restrictions for the removal of social distancing by the 21st June.”

 


Bounce back loans and liquidation – what happens next?


 

To paraphrase a renowned night owl, Ernest Hemingway, the nightclub’s problems  happened in two ways – gradually, then suddenly.

 

In the decade before the pandemic, 21% of the UK’s nightclubs had already permanently closed and the current generation of teens and twenty-somethings, obsessed with healthy lifestyles and advertising them on social media, were beginning to turn away from the dark and secluded nightspots previous generations of clubbers had demanded. 

 

In December 2020, the UK’s largest nightclub operator, Deltic, which owned 52 bars and employed 1,500 staff in such recogniseable venues as Atik, Prizm, eden and Bar & Beyond, had to be bought out by Swedish firm Rekom to avoid entering administration.

 

For an industry that accounts for approximately 8% of all UK employment and at £66 billion, 6% of the UK’s GDP – nightclubs and the night time industries they operate alongside might have expected more robust support from the beginning and throughout the various lockdowns and restrictions but apart from access to bounce back loans, the CJRS furlough scheme and the other local grants and measures on offer to every business, none has been forthcoming beyond this. 

 

According to our research and official data, the average nightclub that was accepted for a bounce back loan will have borrowed over £35,000 to help meet their commitments and unless they asked for and were granted a six month delay in repaying the debt, repayments will have begun in April, two months before their earliest possible reopening date. 

 

This doesn’t take into account any existing HMRC debt, rent and leases, utility bills, security costs, stock reductions and additional staff costs such as redundancies and increasing furlough costs.

 

Being able to meet debt repayments when they come due is one thing for a business, being able to reduce that debt level is another and many night clubs and other night time industries are struggling to do one, let alone both. 

 

The end of June sees the lifting of current suspension on winding up petitions and other creditor actions and aso the end of the forfeiture moratorium that has banned landlords from evicting commercial tenants for unpaid rent. 

 

Michael Kill said: “Most landlords who have not resolved their position could enact or take action against their tenants pretty much within a week of their reopening. 

 

“If the government does not resolve this problem, we could be in a position where we open and a huge swathe of the industry could be bankrupted just a week later.

 

“We propose having a shared burden solution, whereby the landlord, the commercial tenant and the government take an equal proportion of the backdated rent debt and share the cost. It wouldn’t have to sit on the commercial tenant’s head so they’re paying it off for the rest of their life.

 

“The moratorium could be extended given the end of June is coming quite quickly, to protect businesses and use that additional time to resolve.”

 

Chris Horner, insolvency director with Business Rescue Expert said: “Nightclubs are in such a difficult situation right now, it would be harder to create a tougher scenario for a business school case study if you tried.

 

“Bounce back loans coming due for repayment, the imminent end of support measures and lifting of creditor actions like winding up petitions, the real threat of the insolvency moratorium being lifted, a scramble to rehire staff if they haven’t been furloughed or made redundant and uncertainty about whether the June 21st reopening date will go ahead. 

 

“It’s a maelstrom of problems for a sector that was hardly in the best of health before the year of lockdowns. Any business running on accrued debt is at best, standing still, and at worst increasing their burden.

 

Liquidation advice for nightclubs might sound like a drinking schedule, it could actually be the most sensible option available to worried owners right now. 

 

“Even if they don’t choose to close down their nightclub and make a fresh start, they can explore other insolvency options that will either give them the most realistic chance of salvaging their business if it’s viable or coming up with the best solution to dealing with their creditors and outstanding debts.”

 

Discos, nitespots, pub 2 club bars, gin joints, retro nights, dance halls, party zones or just old fashioned nightclubs – whatever you call the seductive, late night place you go for a quiet drink in a secluded corner or a or loud dance on a neon lit dance floor – it’s going to need your help. 

 

When they can eventually reopen, it would be good for customers to rediscover their old skool dance moves or for younger members of Generation Z and their Millennial mates to find out what the fuss is all about. 

 

Nightclub owners and directors can also help themselves too – starting with getting some qualified, free advice. 

 

We offer an initial consultation where we can get a snapshot of the issues facing a business and work with them on an efficient and realistic plan to meet the most immediate threats and plan a course for recovery or reassure restive creditors. 

 

Then you can concentrate on the most important thing – getting the country dancing again.

Contact Us

    More News