Staff and costs hold back sector

Positive and decisive action from government needed

Leon Thompson
Businesses need more support from government, says Leon Thompson.

THE much hoped for recovery still seems a long way away, writes Leon Thompson of UK Hospitality Scotland.

Pre-pandemic, the hospitality industry generated £6 billion for Scotland’s economy each year, employing some 200,000 people in businesses rooted in communities right across the country.

However, with chronic staff shortages, skyrocketing energy prices and multiple other cost pressures, operators desperately need to see steps taken by our governments to address the huge costs of doing business.

Two-thirds of businesses say they are not making any profit and will likely run out of cash reserves before too long.

The latest and 11th Future Shock report, compiled in partnership between UK Hospitality and data and insight specialist CGA, demonstrates how expectations of a swift sector recovery have been dashed.

A key challenge is the high vacancy rate. In Scotland there are around 30,000 unfilled posts, which is impeding business to the tune of 16% of revenues, according to the report.

Nearly half (45%) of businesses have reduced trading hours and a third have had to close for at least a day. This is despite 77% of operators increasing pay to retain and attract staff, resulting in an 11% increase in average pay levels for hospitality staff over the last year.

This rise in labour costs is just one of the cost price pressures affecting businesses in the sector, with 93% of hospitality operators reporting higher energy costs, for example. Then there’s inflation and four in five (83%) business leaders in the sector reported being concerned about ongoing foodservice price rises.

Such concerns are not just affecting businesses, of course, and with people worried about paying for their own rising energy and food and drink prices, consumer confidence is dropping.

With energy costs set to soar again in the Autumn, four in five of them think they will have to reduce their visits to hospitality venues as the crisis bites.

The UK and Scottish Governments provided incredible financial support through the pandemic and UK Hospitality continues to press for more.

Here, UK Hospitality Scotland continues to push for more support through business rates. The 50% reduced rate has ended, presenting businesses with an additional challenge.

We continue to call on the Scottish Government to be clear on its plans on how it will use the Audit Scotland reported underspend on COVID business support money of £2.5 billion.

Allocating this support now will assist businesses on their way to recovery.

Whilst at Westminster we wait to see what the appointment of a new prime minister will bring.

UK Hospitality has campaigned for VAT to be reduced – which we believe should be at 12.5% – and for a more responsive and pragmatic immigration system to fit with the needs of our sector.

Operators will continue to work hard and creatively to meet all of these challenges, but we need positive and decisive action from our governments.

That way our businesses can continue to play their part in delivering for local economies with quality jobs and investment.

• Leon Thompson is executive director of UK Hospitality Scotland.