Premier Inn owner Whitbread PLC (LON:WTB) said it is cancelling its dividend and closing all its hotels with immediate effect while the government puts the country into lockdown to prevent the spread of coronavirus.

Talks with the government are also taking place about using some hotels near hospitals to support workers, the FTSE 100 company said.

Its fast-growing chain of 52 hotels in Germany will also close.

As well as deciding not to declare a dividend for the recently finished full year, Whitbread said it was pausing all discretionary spending on refurbishments and extensions, while placing a “significant number” of staff on military-style furlough on full pay, with support from the government expected to cover pay up to 80% of the salaries of those workers not engaged.

Management are in talks with lenders as they noted that it was “possible” that closing its hotels and restaurants for the lockdown “may amount to a technical event of default under our banking arrangements and certain other financial obligations of the group”.

The government’s pledge to support the hospitality industry with 12 months of business rates relief is expected to save the group around £120mln in the financial year, plus the covering of staff costs. 

These measures will have a “material positive impact on cashflow” during the year, the company said.