A veteran nightclub operator has called on the government to introduce a Covid-style loan guarantee scheme to unlock investment in what he described as a “logjammed” hospitality sector struggling with poor access to finance and rising costs.
Peter Marks, whose career spans more than four decades in bars, clubs and leisure, said the market for hospitality finance is effectively broken, preventing assets from changing hands and deterring new investment at a time when many operators are under severe pressure.
Marks, chairman of Neos Hospitality and former chairman and chief executive of bar and nightclub group Rekom, said a targeted, state-backed loan guarantee could help release billions of pounds in private capital with limited risk to the taxpayer if properly designed.
“We need something to get it moving,” he said. “The market is broken. It is not going to be able to repair itself if it’s not investable.”
He argued that investors have increasingly turned away from hospitality because of uncertainty over exits, rising employment and tax costs, and weak consumer spending.
“I speak 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 enter,” Marks said. “That means businesses can’t refinance, assets aren’t trading, and the sector risks becoming stagnant.”
Marks has proposed a scheme under which the government would underwrite up to 80 per cent of bank loans made to larger hospitality businesses on standard commercial terms. The aim would be to encourage banks to re-engage with the sector and restart the flow of debt finance.
He said the difficulty in accessing funding is 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 it continued along the trajectory seen between 1997 and 2004. While non-bank lenders have stepped in, they 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 so since 2008.”
The government already operates a growth guarantee scheme, which provides lenders with 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 required to support the modern hospitality industry.
“Most of the high street is owned by large institutions, and they want bigger businesses as tenants,” he said. “That means you need far more firepower.”
During the Covid-19 crisis, the government guaranteed or disbursed an estimated £133 billion through emergency loan schemes. However, those programmes have been heavily criticised for poor oversight. Of the £46.5 billion lent under the bounce back loan scheme, £11.4 billion has already been paid by taxpayers to cover bank losses on defaulted loans.
Chancellor Rachel Reeves said last week that mismanagement of the pandemic schemes left the “front door wide open to fraud”.
Marks said any new hospitality-focused scheme would need to be fundamentally different, with proper due diligence and normal commercial lending standards.
“You give them a guarantee loan scheme like you did in Covid, but this time it’s not a blind loan,” he said. “Banks can do proper diligence. Lame ducks would not be backed.”
He argued that targeted state intervention would be justified given the structural challenges facing the sector.
“If the market is broken, the government is completely within its rights to get involved,” he said. “They did it with British Steel. This would be far more targeted — like a needle injection into the joints where the help is most needed. If we can get the debt stream flowing, we can unblock the logjam.”
With hospitality employers facing rising wage bills, higher taxes and continued pressure on consumer spending, Marks warned that without action the sector risks prolonged stagnation — and further hollowing out of the high street.
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Call for Covid-style loan scheme to unlock investment in ‘logjammed’ hospitality sector