Lenders to Caffe Nero have brought in financial advisers ahead of a business restructure after being hit by the devastating effects of shutdown.
Alcentra and Partners Group – which provide mezzanine debt to Caffe Nero, one of the country’s biggest coffee shop chains – have drafted in FTI Consulting to advise on the implications of a company voluntary arrangement.
Caffe Nero would hold talks with the British Property Federation, which represents commercial landlords, on Friday to discuss the CVA plans.
Sources told Sky News that while a final decision on a CVA had yet to be taken, it was likely to be announced later this month.
A CVA would enable Caffe Nero to reduce its rent liabilities and exit loss-making stores If it gets launched, it would be the most recent insolvency mechanism unveiled by a major High Street hospitality business this year.
Caffe Nero, like its rivals such as Pret a Manger, has been heavily impacted by the reduced footfall in city centres as millions of Britons work from home.
The company operates 660 stores across the UK, more than 90 per cent of which had reopened after the original shutdown ended in June.
Caffe Nero, which is working with KPMG on its options, is likely to seek steep rent cuts from landlords as part of any restructuring deal.
The group, which employs about 5,000 people and is owned by Gerry Ford, is said to have been performing strongly prior to the pandemic.
It comes after Chancellor Rishi Sunak announced that furlough would be extended until the end of March amid industry fears that shutdown could last six months.
Yesterday the Bank of England decided to pump another £150billion into the UK economy, which it said had gone into reverse because of the new lockdown.
In other coronavirus developments:
- Tory MPs lashed the Government for using ‘dodgy coronavirus data’ to justify a second lockdown in an echo of Britain’s war to Iraq in 2002-03;
- Travel quarantine could be slashed from 14 days to just five under Government plans which would deliver a major boost to the travel industry;
- Coronavirus cases remained flat at 24,141 today despite the PM justifying lockdown by claiming the NHS is under threat from soaring hospitalisations;
- Cars are queuing outside Covid-19 testing centres in Liverpool as the city today kicks off England’s first city-wide mass testing scheme;
- Manchester students tore down fencing erected around their halls of residence by the university as they warned of their mental health.
Caffe Nero, like its rivals such as Pret a Manger, has been heavily impacted by the reduced footfall in city centres as millions of Britons work from home (shop at Heathrow Airport)
The group, which employs about 5,000 people and is owned by Gerry Ford, is said to have been performing strongly prior to the pandemic (file photo)
Yesterday the Bank of England decided to pump another £150billion into the UK economy, which it said had gone into reverse because of the new lockdown (file photo)
More than 10 per cent of UK hospitality chiefs say they could axe 50 per cent or more of their workforce by the end of the year, a YouGov poll has revealed
The data reveals nearly a fifth (18 per cent) of education-based businesses could also make cuts of between 20 and 29 per cent of their workforce by the New Year, while a third of bosses at legal firms across the UK believe they will have to cut up to 10 per cent of their staff
Bosses of large (more than 250 employees) and medium (50-249 staff) businesses, firms in the hospitality sector and those in Scotland and Wales were most likely to make the biggest cuts, with some warning of cuts of up to 60 per cent of their workforce, the YouGov figures reveal
In September, a spokesperson for Caffe Nero said: ‘It has been a difficult period since lockdown measures were introduced by the government and we’re working incredibly hard to navigate our way forward.
‘As part of this, we are working closely with advisors to help review our options and assist with our ongoing negotiations with landlords.’
Earlier this week John Lewis announced it will cut 1,500 head office jobs in an effort to bolster the business struggling because of shutdown.
The John Lewis Partnership revealed the cuts as part of the next phase of its five-year plan to return it to sustainable profits by 2025.
John Lewis – famous for its Christmas ads – is widely seen as a benchmark for High Street performance in the UK.
But it received a serious blow earlier this year after its Waitrose arm was ditched by Ocado in favour of Marks & Spencer.
The news came on the same day Lloyds Banking Group has said it plans to cut another 1,070 jobs as it continues a major restructuring programme.
John Lewis said Patrick Lewis, Executive Director, Finance had also decided to leave at the end of this year ending a 26-year career.
Chairman Sharon White said: ‘Our Partnership Plan sets a course to create a thriving and sustainable business for the future.
‘To achieve this we must be agile and able to adapt quickly to the changing needs of our customers.’
‘Losing Partners is incredibly hard as an employee-owned business.
‘Wherever possible, we will seek to find new roles in the Partnership and we’ll provide the best support and retraining opportunities for Partners who leave us.’
It comes a month after its flagship department store in Oxford Street was granted permission to change some shopping areas into offices.
The third to the eighth floors of the building have been earmarked to have their uses transformed.
Lloyds said its latest restructuring move will result in a net reduction of around 740 roles, as it will also create a further 330 positions across the business.
It is the latest set of redundancies after the group restarted its major restructuring programme following the pandemic.
In September, it said it would slash 865 jobs mainly in its insurance, wealth and retail teams.
A Lloyds Banking Group spokeswoman said: ‘This morning we shared changes to some of our teams and we can confirm a net reduction of around 730 roles.
‘These changes reflect our ongoing plans to continue to meet our customers’ changing needs and make parts of our business simpler.
John Lewis announced it will cut 1,500 head office jobs to bolster the business
Lloyds Banking Group has said it plans to cut another 1,070 jobs amid the continuing pandemic
Lloyds Banking Group Plc’s large company headquarters in Gresham Street, London
Mr Sunak announced yesterday that furlough will last until the end of March 2021 – completing a protracted U-turn and returning the government effectively where it began the crisis
The Bank of England warned yesterday that the UK is set to be harder hit economically that many other parts of the world
‘The majority of colleagues briefed today will not leave until January at the earliest.
‘We will help colleagues who are affected find new roles and redeployment opportunities wherever possible.
‘Everyone will be given access to a package of training and support designed to help them secure their next position, whether within or outside of our business.
‘Change does mean making difficult decisions and our focus remains on supporting our customers, colleagues and communities.’
Rob MacGregor, Unite national officer, said: ‘Unite cannot comprehend why LBG would choose to cut 1,000 staff who have given the bank such commitment and dedication during a global pandemic.
‘These staff have worked tirelessly despite any risks to themselves.’
These latest cuts come less than a fortnight after it told most of its 65,000 staff to work from home until spring at the earliest.
Lloyds wants them to stay away from the office for at least the next five months.
It said it was following Government guidance urging employees to work remotely if they can.
The move by the bank came as a blow to the City of London, where it employs thousands.
About two-thirds are working from home, but staff are still serving customers at its 890 branches.
Chris Williamson, an economist at the business consultancy IHS Markit, warned: ‘The pace of economic growth slowed in October to the weakest since recovery from the national lockdown began.’
Other large firms are closing offices or asking employees if they want to work from home for ever. The consultancy Deloitte could shut four offices, which would leave 500 people working from home.
Government borrowing has been spiralling as tax revenues slump and the Treasury pours out bailout money
The 11 per cent contraction in GDP this year, as projected by the Bank of England, would be the worst for 300 years – eclipsing the downturn sparked by the First World War and Spanish Flu
He said economic output would be 11 per cent lower at the end of the year than it was at the start, and that unemployment would rise from the current level of 1.5million to 2.6million. Pictured: A closed pub in Soho tonight
Meanwhile the Bank of England yesterday warned that the UK economy has been put into reverse by Boris Johnson‘s latest national lockdown.
As tough new Covid-19 restrictions were imposed across England, the central bank slashed its forecast and said the recovery would take longer than previously feared.
Governor Andrew Bailey said the Bank now expected the economy to shrink again in the final three months of the year, having grown strongly between July and September as earlier lockdown measures were eased.
He said economic output would be 11 per cent lower at the end of the year than it was at the start, and that unemployment would rise from the current level of 1.5million to 2.6million.
Unveiling plans to pump another £150billion of emergency funds into the economy, Mr Bailey said: ‘We are here to do everything we can to support the people of this country – and we’ll do it and will do it quickly.’
He said the UK had never seen such economic disruption in peacetime, adding: ‘Even then, these numbers are unprecedented in terms of the scale.’
Critics of the latest restrictions seized on the forecasts. Tory MP Steve Baker, a member of the Commons Treasury committee, said such stark projections were one of the key reasons why he had voted against them this week.
But he added: ‘If we are to end this lockdown and all the harm it does we must now all comply. The situation could scarcely be more serious for people’s livelihoods.’
The Bank said it now expects the economy to shrink by 2 per cent over the last three months of this year, having previously forecast growth of 3.5 per cent.
This will leave the economy 11 per cent smaller by the end of 2020 than it was at the start – much worse than the 5.4 per cent contraction the Bank was expecting.
And despite the extension of the furlough scheme announced by Chancellor Rishi Sunak yesterday, the peak unemployment rate will now likely be even higher than the 7.5 per cent initially expected at 7.75 per cent. This would mean the second lockdown costing an extra 80,000 jobs, leaving 2.64million people out of work.
With the new lockdown forcing many businesses to close again, the Bank was expecting about 5.5million people to fall back onto the furlough scheme, up from some two million at the end of October.
The Bank said it expects the second lockdown to end on December 2, the deadline given by the Prime Minister, though it believes the UK will go straight back into the localised tier system.
It also predicted restrictions will be lifted further at the end of March next year, although the economy will not regain lost ground until the first three months of 2022, several months later than initially hoped.
Economists said, however, that the predictions looked ‘overly optimistic’. Ruth Gregory, senior UK economist at Capital Economics, said: ‘Our view is that it will take until 2023 for the economy to return to its pre-pandemic level.’