Hospitality debt could be at £1.2bn as grant help 'not enough'

Tourism leaders told Holyrood’s Culture, Tourism, Europe and External Affairs Committee that top-up grants announced by Finance Secretary Kate Forbes earlier this week do not even meet monthly fixed costs for many hospitality businesses.

Ms Forbes set out that on top of their existing four-weekly £3,000 payment, large hospitality businesses will receive one-off £25,000 grants – while small hospitality firms will be eligible for a £6,000 one-off grant.

READ MORE: Coronavirus: Top-up grants to help businesses 'weather the storm'

Larger retail and leisure businesses will receive one-off £9,000 grants on top of their four-weekly £3,000 payments and smaller retail and leisure firms will be given £6,000.

In total since the start of the pandemic, the Scottish Government has handed over almost £3 billion to businesses and the economy - more than one third of its total support.

Marc Crothall, chief executive of the Scottish Tourism Alliance, told MSPs that “while the headline amount is a sizeable number”, he stressed that “it’s virtually nothing” by the time it is spread out to all businesses.

He pointed to the £25,000 top-up grants, warning that the fixed costs of some hotels are “well in excess of that money”, adding that a typical pub can face monthly fixed costs of up to £8,000.

Mr Crothall added: “The scale of the grant that is there is unfortunately way, way short of what will be needed.

“We are in a far more desperate state than we were a few months back – the money has dried up.

Marc Crothall, chief executive of the Scottish Tourism Alliance

“The cities themselves have been absolutely slaughtered.”

He warned that “Scotland has adapted a much more stricter approach to the lockdown”, meaning that “our recovery will take longer”.

Mr Crothall also warned that the “flip-flopping over furlough” being extended by the UK Government meant that “tough decisions had to be made by management" of hospitality businesses amid evidence Scotland's unemployment rate has risen more sharply than other parts of the UK.

Mr Crothall called for any further funding announcements are only made when “mechanisms and processes are established” beforehand to ensure businesses can apply and receive the funds promptly.

The warnings come as a coalition of traders in the Scottish Hospitality Group laid out the extent of debt taken on by traders.

The organisation has claimed that if all of Scotland’s 16,000 licensed premises are facing a similar stark financial situation, the industry could be carrying between £800 million and £1.2 billion of debt - while the groups debt totals £16 million.

READ MORE: Brexit and Covid: Why Scots cities will face tougher fight to bounce back

The Scottish Hospitality Group expects the amount of debt tallied up to rise further following a dire and non-existent festive trading period – claiming not enough support has been offered to businesses.

The group said the debt is a combination of coronavirus business interruption loans, bank loans, overdrafts and payment deferrals and is necessary to pay property and equipment rent, among other fixed costs.

Stephen Montgomery, spokesperson for the Scottish Hospitality Group, 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.

READ MORE: Hospitality and tourism support 'marred' by impending lockdown

“It’s another reminder of why both governments need to stop playing politics with lifeline support for the sector." 

He added: "This week we’ve seen Kate Forbes re-announce £25,000 each for bigger operators which she already announced and agreed with the sector in December before the Boxing Day lockdown. And last week we had Rishi Sunak admitting his £375 million wasn’t new money.

“Both sides are at it and this confusing, conflicting behaviour needs to end. 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.”

Nicola Sturgeon was asked about the concerns at her daily coronavirus briefing and stressed the Scottish Government is trying to get support to businesses “as fast as possible”.

She said: “The Finance Secretary Kate Forbes is very focused on making sure that as we announce financial support, any arrangements for getting that out the door are put in place as quickly as possible and it gets to businesses as fast as possible.

“I think we can further improve that, to be frank about it.”

First Minister Nicola Sturgeon

Ms Sturgeon added: “Hospitality has been harder hit than most other sectors in this pandemic – that is something that all of us feel heart sorry about and want to look forward to a day hopefully not too much further in the future where we can start to support the recovery of these sectors.

“But right now, there’s no alternative to this and that’s the hard thing.

“The financial support is there – the Finance Secretary in the last few days announced additional funding for the hospitality and retail sector.

“This is not easy for anybody and I understand that. We’ve got to suppress this virus and that takes every single one of us to behave in the ways we all know helps to stem the spread – that's the only thing, with vaccination doing its work, that will open the way for that return to normality and businesses to get back on their feet as we all desperately want to see.”