IT is in the midst of enormous upheaval. But remarkably, the Scottish hospitality industry would appear to be retaining its allure, both as an employer and a backdrop for entrepreneurial activity.

This week The Herald has been putting the spotlight on the challenges facing operators as they get to grips with the post-pandemic world, which are as numerous as they are profound.

The series launched on Tuesday with an exclusive report on the latest state-of-the nation survey by the Scottish Licensed Trade Association, which made no bones about the difficulty of current trading conditions. Following a disappointing Christmas period, which showed takings were down compared with the last “normal” festive season before the pandemic, the survey found the cost of doing business has become so acute that three out of every five outlets are restricting their hours of operation.

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Nearly half (45 per cent) said they had seen their energy costs rise by more than 250%, which has come as every other overhead has risen sharply too, from food and drink to labour and business rates. And there are more costs and challenges coming quickly down the track, with operators concerned – with ample justification – about the financial and practical implications of the deposit return scheme, and new proposals to further limit alcohol advertising and marketing.

Faced with such a demanding operating landscape, it was no surprise to hear the SLTA repeat its call for government support.

“We previously warned that it wouldn’t be economically viable for many outlets to remain open, and we are now seeing this come to fruition with a knock-on impact on tourism and Scotland’s wider food and drink sector, including the supply chain,” said managing director Colin Wilkinson.

“Christmas/New Year 2022 was the first time since 2019 that our pubs were fully open without Covid restrictions, but the feedback in our survey shows that half of outlets were still in decline versus the last ‘normal’ festive season trading period.”

Yet for all the undeniable difficulties facing the industry right now, there seems to be no shortage of entrepreneurs keen to make their mark on the sector, or people determined to build careers within it.

This point was underlined in The Herald this week by renowned Glasgow restaurant operator Alan Tomkins, who declared that, despite the current cost climate, the industry continues to attract people with fresh ideas and enthusiasm.

Mr Tomkins issued a call for government at local and national level to “embrace” the industry as he highlighted its importance to Glasgow as an employer, observing that in many instances units that formerly housed shops are now home to hospitality businesses of varying styles.

“If you look at Glasgow as an example, there are so many hospitality businesses there now, and it is such a big, big part of the city,” Mr Tomkins said. “I think the council and the governments should be embracing this because I am sure it is not just in Glasgow.

“Many of the shops that are no longer there are becoming hospitality-style places, and it is a massive employer in these city centres. There has been a change – there are so many different styles of business, from the small independents to the large chain operators.”

However, Mr Tomkins was quick to emphasise that trading remained far from easy in the current climate, adding: “The problem for businesses is, despite everybody trying to be optimistic, the overheads make it so, so difficult.”

It is obviously hugely encouraging to hear that entrepreneurs are sufficiently confident to open new businesses when margins are so tight, and consumers remain under intense pressure from high inflation and increasing interest rates.

Read more: Scotland's pubs and restaurants cut opening hours as ‘tidal wave’ hits

The owners of these ventures are clearly betting that better times are around the corner. However, there would not appear to be any sign of economic conditions markedly improving in the UK any time soon. Indeed, only this week the International Monetary Fund forecast that Britain would be the only member of the G7 group of nations to see its economy shrink this year.

In these circumstances, the thoughts of many in the industry have turned towards what government – at local, Scottish and UK level – can do to help ensure as many businesses as possible survive.

Tim Martin, the outspoken chairman of pub giant JD Wetherspoon, has his fair share of detractors in the industry, not least because of his very vocal support of Brexit. But there are many in the sector who are supportive of his ongoing calls for the level of value-added tax (VAT) applied to the industry to be cut.

Mr Martin returned to the theme a few days ago when Wetherspoon updated the City on festive trading. He declared: “The biggest threat to the hospitality industry is the vast disparity in tax treatment between pubs and restaurants and supermarkets.

“Supermarkets pay zero VAT in respect of food sales, whereas pubs and restaurants pay 20%. This tax benefit allows supermarkets to subsidise the selling price of beer.”

Mr Martin added: “Unless the industry campaigns strongly for equality, it will inevitably shrink relative to supermarkets, which will not help high streets, tourism, the economy overall, or the ancient institution of the pub.”

Mr Tomkins, one of Glasgow’s foremost restaurateurs, does not operate in the same part of the industry as Wetherspoon – his family’s venues are focused more on fine wine and high-quality dining. But he shares common ground with Mr Martin on the issue of VAT.

He also said there remains a strong case for the system of business rates to be overhauled with regard to how it applies to the hospitality trade, amid ongoing concern that the method used to calculate bills is not fair.

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Mr Tomkins said: “If VAT was reduced for hospitality, it would really reinforce the business and give it more life expectancy. I think there is an argument for that.

“If I had a wish list for hospitality to be helped and to reward it for the people who keep creating the businesses and the sites, it would be a complete reassessment of the [business] rates and VAT to be looked at, particularly for food sales in restaurants.”

The challenges facing the hospitality industry remain acute, but there is justifiable hope that the outlook can improve with the appropriate level of government support. Cutting VAT would seem like a logical place to start.


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