Economic crisis ‘worse than COVID’

headshot of colin wilkinson wearing a suit and tie
SLTA managing director Colin Wilkinson.

Urgent action needed from both governments to protect businesses

MANY say that this economic crisis is going to negatively impact more on the hospitality sector than the COVID pandemic – and if governments’ inactions continue, then the answer is unquestionably ‘yes’, writes Scottish Licensed Trade Association managing director Colin Wilkinson.

The hospitality sector continues to face a slow recovery from the pandemic for a multitude of reasons.

The most recent challenges presented by the cost-of-living crisis, soaring energy costs, inflation at a 40-year high, skills shortages, coupled with more expensive borrowing, are worrying indicators that we are trapped – thanks to the lack of meaningful government intervention – in a perfect storm with no visible path to recovery.

It is no wonder that the majority of our pubs and bars report that they are either running at a loss or just keeping their heads above water.

At a time when our trade should be upbeat, the mood is decidedly subdued as business owners speculate over what the next barriers to recovery will be. A poor hop harvest, meaning higher prices, due to drought is the latest – what next?

One of the continuing barriers is undoubtedly energy costs with increases of 300% and more being fairly common.

With further increases expected in October, it is no wonder that operators, many already only opening partially due to lack of demand as consumers look more carefully at their disposable income, are now contemplating whether to close down completely over the winter period.

Not only is that bad for business, bad for tourism and bad for employees, what message does that give to our domestic and foreign visitors about what Scotland has to offer?

The Westminster government must introduce a commercial energy cap as soon as possible if businesses are to survive.

Staff shortages and high wage demands are also a huge problem for our sector, particularly for independent SMEs, where they do not have the flexibility or the finances to offer the highly inflated salaries to attract staff in the same way as large multi-operators can.

In addition, SMEs are also now competing with an increase in the number of “transfer fees” that we see being offered, more so by larger companies, desperate to poach staff to fill thousands of vacant posts within the sector.

No one can be blind to the fact that the current UK immigration points system, shaped by Brexit, is not fit for purpose for the hospitality sector’s needs, and this must be addressed by the Westminster government.

Hospitality businesses have done all they can to absorb some of the rising business costs that have been inflicted, recognising that customers are facing the same soaring cost increases to their energy, fuel and food bills.

However, operators have no choice now and finding the right balance between maintaining footfall vs business viability is exceptionally difficult.

With the COVID pandemic there was at least light at the end of the tunnel. With the current economic crisis, that light seems very dim right now but given the right tools and support in time the sector can be more resilient to the challenges ahead.

Both the Westminster and Scottish governments need to act now and adopt a focused business recovery plan, not least an immediate reduction in the rate of VAT and a substantial lowering of business rates for the licensed hospitality sector which is already disproportionately overburdened. This will protect businesses and jobs and stimulate economic growth.

• Colin Wilkinson managing director of SLTA.