By Scott Wright
BREXIT fears and slowing growth in the global economy meant Scotland’s crisis-torn hospitality sector was already in distress before the coronavirus pandemic forced outlets to close their doors.
The number of bars and restaurants in Scotland in critical or advanced distress was up 500 per cent in the first three months of the year compared with the same period in 2019, according to latest quarterly Red Flag Alert data from Begbies Traynor.
The insolvency specialist defines firms as being in critical or advanced financial distress if they have had winding up petitions or decrees totalling more than £5,000 against them. It found there were 18 firms in this category in the first three months of the year, compared with just three over the same period in 2019.
READ MORE: Hospitality trade slams ‘unfair’ exclusion from Covid-19 grants
The report also found 1,207 instances of bars and restaurants in Scotland showing significant or early distress in the first three months of the year, up 5% on 2019. Businesses fall into this category if there are minor decrees against them or they are showing a marked deterioration in key financial ratios.
The survey comes as hospitality businesses in Scotland battle to survive after closing their doors under government social distancing measures introduced in March to halt the spread of coronavirus.
As reported in The Herald yesterday, anger is mounting in the industry over the methodology used by the Scottish Government to determine whether businesses are eligible for emergency grants. Industry figures say it is unfair to not provide grant support to businesses which operate from properties with a rateable value higher than £51,000.
READ MORE: Glasgow bar firm slams Government as virus leads to 200 jobs cut
Ken Pattullo, head of Begbies Traynor in Scotland, said: “For many businesses, particularly in consumer-facing sectors such as hospitality and retail, the post-Christmas period is the toughest, and this appears again to have been the case in the first three months of 2020, except, worryingly, much more so this year than last.
“The last couple of years of economic uncertainty has now been exacerbated by the unexpected and devastating impact of Covid-19 which may, unfortunately, prove to be the final straw for many businesses in these sectors and, indeed, in many others.
“While the Government’s attempts to offer some support to businesses are welcome, the reality is that this ‘sticking plaster’ approach may well simply delay the inevitable.”
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