Debt 'crippling the hospitality sector' during pandemic

Hospitality businesses in one industry body have taken on more than £16m in debt during lockdown to help them stay afloat, the group has said.

The Scottish Hospitality Group (SHG) said the debt is a combination of coronavirus business interruption loans, bank loans, overdrafts and payment deferrals and is necessary to pay property and equipment rent, among other fixed costs.

SHG said that if Scotland’s 16,000 licensed premises were in the same position as SHG’s members, the industry as a whole would be carrying a debt burden of anywhere between £800m and £1.2bn.

It comes after SHG said last week that trading was 80% down during the Christmas trading period, with businesses losing £12,000 per week per premises on average.

SHG, whose members include Buzzworks Holdings, Signature Pubs, Montpeliers and G1 Group, said the debt figure is expected to rise significantly due to the worst-ever December trading figures and a “major shortfall” in government support.

Stephen Montgomery, SHG spokesman, said: “Our members don’t have their usual Christmas reserves to see them through the quieter months and government help doesn’t even cover the costs of employer furlough contributions for most operators.

“This debt is necessary to keep jobs alive, but it will come at a heavy price to the sector, and that’s if we even survive.

“It’s another reminder of why both governments need to stop playing politics with lifeline support for the sector.

“This week we’ve seen Kate Forbes re-announce £25,000 each for bigger operators which she already announced and agreed with the sector in December before the Boxing Day lockdown.

“And last week we had Rishi Sunak admitting his £375m wasn’t new money.

“Both sides are at it and this confusing, conflicting behaviour needs to end. Businesses must have clarity and honesty about what’s available and for that help to be in their hands much quicker than it has been so far.”

A Scottish Government spokesman said: “Every decision we take has the sole objective of trying to keep the country as safe as possible, with as little harm to health – and to the overall economy – as possible.

“We sympathise deeply with businesses, particularly those in the hospitality sector given they are hit hardest by these necessary restrictions.

“There is already a significant package of grants in place for these businesses and we will continue to work with the sector, including the Scottish Hospitality Group, as we navigate our way through the global pandemic.”

A Treasury spokesman said: “We’ve taken swift action throughout the pandemic to protect lives and livelihoods, including providing the Scottish Government with an additional £8.6bn which they can use to support businesses across Scotland.

“At the start of winter we announced Pay As You Grow; to give firms greater flexibility and time to make their repayments on Bounce Back Loans.

“We’ve also extended the furlough scheme until April, providing certainty for businesses as they navigate the months ahead.

“And we’ll have a Budget in early March to take stock of our wider support, and set out the next stage in our economic response.”