Mounting Debt Crippling Scotland’s Hospitality Sector

Companies in the Scottish Hospitality Group (SHG) say they have taken on over £16m of debt over the past year to stay afloat which, if multiplied across Scotland’s 16,000 licensed premises, means the industry would be carrying an estimated debt burden of between £800m and £1.2b.

SHG said it expected this figure will rise significantly due to the worst-ever December trading figures and a “major shortfall” in government support, which in many cases is lower than what employers have to pay in national insurance, pensions and holiday accrual.

The debt is a combination of funds from the Coronavirus Business Interruption Loan Scheme, bank loans, overdrafts and payment deferrals and is necessary to pay property and equipment rent, among other fixed costs.

Servicing and repaying the debt will severely impact on firms’ ability to bounce back from the pandemic and to invest for recovery, SHG said. Spokesman Stephen Montgomery 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. 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.”

Last week, SHG reported its members took in only 20% of last year’s earnings during December. The figures mean SHG members lost £9.6m of revenue – money that would normally keep businesses alive until the spring.

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.”