Reopening is first step in long recovery for hospitality industry with return to 2019 levels of businesses not expected until 2022 at earliest, trade group says
SUSTAINED sector-specific support is needed for businesses in Scotland’s hospitality sector as a return to 2019 levels of businesses is not expected until 2022.
That’s the message from trade group UK Hospitality and more than 30 operators from across Scotland who have sent a joint letter to first minister Nicola Sturgeon (the group has also written to prime minister Boris Johnson) calling for a raft of longer-term measures to support hospitality businesses’ recovery.
As pubs, restaurants and hotels got the green light to reopen indoors from Wednesday July 15 after almost four months of closure, the group warned that the hospitality sector “will suffer for a prolonged period” due to suppressed demand from international visitors, restrictions on business travel and events, a delayed return to office working, the impact of social distancing on businesses’ viability and consumer uncertainty. It said there are forecasts of “significantly reduced occupancy” for the rest of this year and that, across the sector, sales in 2020/2021 are not expected to reach 40% of the previous year’s level with “half of businesses probably failing to reach break-even until the end of 2021 and no anticipated return to 2019 levels of business until 2022 or even later”.
Highlighting the “importance and plight” of larger hospitality businesses, many of which missed out on government grants due to having rateable values of more than £51,000 and incurred “significant fixed costs” while closed – an average of £60,000 a month for hotels, the group said research from 34 of these businesses showed that combined revenue of £252 million (excluding VAT) in the last financial year is expected to drop 60% in the current financial year to £96m; and from the 7200 jointly employed, over half (4000 jobs) are “at risk or have been lost due to COVID-19”.
Calling for a “radical, imaginative, adequately-resourced sector-specific support package from the Scottish and UK governments”, the group has outlined a number of support measures, including:
- the development of a sector-specific flexible job support package based around the furlough scheme to run until October 2020 and potential to extend it until spring 2021;
- the Scottish Government to lobby the UK Government to extend the temporary VAT reduction on food and accommodation until October 2021;
- the continuation of deferral of all VAT, PAYE and business tax payments due to government in 2020 until at least April 2021;
- the continuation of the business rates ‘holiday’ until at least 2021/2022, cancellation of the 2022 revaluation and a commitment to fundamentally review the business rates system for hospitality businesses;
- funding support for larger hospitality businesses which have not received grants and an interest holiday on any “unwarranted borrowing”;
- and measures to reduce business costs, such as employers’ National Insurance contributions, and for the deferral or abandonment of new and proposed regulations that will bring additional costs for businesses and customers, such as the ‘tourist tax’ and Deposit Return Scheme.
In the letter, the group acknowledge the support given to date by both the UK and Scottish governments, saying that it “assists with, but does not guarantee, the viability and sustainability of very fragile businesses as they make the uncertain transition to reopening”.
“The huge impact on hospitality businesses will not be resolved with reopening, especially in the light of consumer uncertainty and the absence of international visitors, business travellers, group business and specialist/activity tours,” it said.
“The impact will reach well into 2021 and beyond and there is no single solution. Businesses in a variety of locations serving diverse markets will be impacted in different ways over different time periods. Not all businesses will elect to reopen immediately following lockdown as low levels of demand, high fixed costs and additional operating costs will likely result in greater losses than suffered during closure.
“UK Hospitality has written to the prime minister and other members of the UK Government advocating support for the restart, recovery and revival of hospitality throughout the UK. This will require, in Scotland, more than simply a Barnet-related settlement given the greater dependency of the Scottish economy on hospitality and tourism activity.
“The measures outlined will help give our sector the best chance of sustainable recovery and enable us, once again, to support the economic growth and national wellbeing of Scotland.”