By Catherine Livingstone
While there are ample signs of optimism for the hospitality sector preparing for a busy summer season – hopefully free of imposed government restrictions for the first time in a few years – those operators who have successfully negotiated the many hurdles of coping with COVID that have come their way would do well to adopt a cautious approach over the months ahead.
That’s because, while in retreat, COVID continues to cast a shadow over the licensed trade in terms of high levels of staff absenteeism and lower than usual footfall as a result of staff and customers self-isolating following a positive COVID test.
And while the most financially savvy operators have managed to negotiate the various COVID-related obstacles put in their path over these last few years, a fresh obstacle in the form of the restoration of VAT to 20%, despite industry lobbying to retain the lower 12.5.% rate, means that many will be required to pass on double-digit price increases to their customers.
Given that this increase will be accompanied by a range of other cost rises, including the return of business rates bills, an increase in National Insurance and the minimum wage, soaring energy bills and rising food and drinks prices, it is clear that licensees will not have their challenges to seek.
In light of this, operators are advised to apply via their local authority for the 50% business rates relief available for hospitality businesses for the first three months of the 2022/2023 financial year.
The Non-Domestic (Coronavirus Reliefs) (Scotland) Regulations 2022 state that 50% relief on non-domestic rates is available for eligible retail, hospitality and leisure properties, capped at £27,500 per ratepayer, from 1st April to 30th June 2022.
In this challenging scenario, constant cashflow management is crucial, as is striking the right balance between raising prices and attracting wary customers back through the front door.
In order to get the balance right, licensees need to know their numbers to make sure that their operations make financial sense.
That’s why I would urge licensees to review their pricing structure and address any staffing issues as a priority in preparation for a (hopefully) busy summer season ahead.
Catherine Livingstone is a partner and head of the business advisory services team at Wylie & Bisset
