The hospitality industry has been a high profile COVID casualty. For an already low margin business, the combination of prolonged closures followed by socially distanced openings, supply issues and staff shortages has been very damaging. For the UK, Brexit has magnified these effects.

Figure 1 shows credit trends for the UK and US Restaurants and Bars sector.

Figure 1: Restaurants and Bars, UK vs. US

From March 2020, deterioration was initially steeper in the US, with credit risk rising by 60% by October 2020. UK credit risk also rose sharply over the same period, with a 40% increase over the same period.

Since then, the US has shown an erratic but generally positive trend (despite a sharp blip down in May 2021). The UK clearly saw a short-lived benefit from the “Eat Out to Help Out’ campaign in Q4 2020, but it has been in steady decline since the start of 2021.

The two sectors have now almost reversed positions since October 2020, with UK risk up 60% since the initial COVID outbreak while the US has recovered about a third of its initial deterioration.

These trends are reflected in the pattern of upgrades and downgrades for the Restaurants and Bars sector in the two countries. Figure 2 breaks the pandemic period into the 6 months to August 2020 and the following 12 months to August 2021 [please continue below to access full report].

Figure 2: Restaurants and Bars, UK and US, 21-category notch changes, 2020 and 2021

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