A veteran nightclub operator has called on the Government to introduce a Covid-style credit guarantee scheme to unlock investment in what he says is a “stagnant” hospitality sector struggling with poor access to finance and rising costs.
Peter Marks, whose career spanned more than four decades in bars, clubs and leisure, said the hospitality finance market was effectively broken, preventing assets from changing hands and discouraging new investment at a time when many operators are under intense pressure.
Marks, chairman of Neos Hospitality and former chairman and chief executive of bar and nightclub group Rekom, said a targeted, government-backed loan guarantee could, if designed correctly, help unlock billions of pounds of private capital while limiting risk to the taxpayer.
“We need something to get it going,” he said. “The market is broken. It will not be able to repair itself if it is not investable.”
He argued that investors had increasingly turned away from hospitality due to uncertainty over exits, rising employment and tax costs and weak consumer spending.
“I talk to friends in private equity and fund management and they all say the same thing: We can’t see an exit, so we won’t get in,” Marks said. “This means companies cannot refinance, assets cannot trade and the sector risks stagnating.”
Marks has proposed a program in which the government would underwrite up to 80 percent of bank loans to larger hospitality businesses at commercial rates. The aim would be to encourage banks to re-engage with the sector and restart the flow of debt financing.
He said the difficulty in accessing finance was part of a broader, long-term problem. Bank lending to small and medium-sized enterprises is estimated to be around £90 billion lower than it would have been had the trend observed between 1997 and 2004 continued. Non-bank lenders have stepped in, but have only partially filled the gap.
“What you need to do is get the banks to lend to these sectors,” Marks said. “They haven’t really done that since 2008.”
The government already operates a growth guarantee scheme, which offers lenders a 70 per cent taxpayer-backed guarantee, but this is limited to loans of up to £2 million. Marks believes this falls far short of what is needed to support the modern hotel industry.
“Most of Main Street is owned by large institutions and they want larger companies as tenants,” he said. “That means you need a lot more firepower.”
During the Covid-19 crisis, the government has guaranteed or paid out an estimated £133 billion through emergency lending schemes. However, these programs have been heavily criticized for poor oversight. Of the £46.5bn borrowed under the bounce back loan scheme, £11.4bn has already been paid by taxpayers to cover bank losses from defaulted loans.
Chancellor Rachel Reeves said last week that the mismanagement of pandemic plans had “opened the door wide” for fraud.
Marks said any new hospitality-focused program must be fundamentally different, with appropriate due diligence and normal commercial lending standards.
“You give them a guarantee loan program like you did during Covid, but this time it’s not a blind loan,” he said. “Banks can exercise appropriate due diligence. Lame ducks would not be supported.”
He argued that targeted government intervention was justified given the sector’s structural challenges.
“If the market collapses, the government has every right to intervene,” he said. “They did it with British Steel. That would be far more targeted – like a needle injection into the joints where help is needed most. If we can get the debt flowing, we can clear the logjam.”
As hospitality employers face rising wage costs, higher taxes and continued pressure on consumer spending, Marks warned that without action the sector risks continued stagnation – and a further hollowing out of high streets.
