Night Time Industries Association's Gavin Stevenson: 'Scots ministers are bankrupting us'

Night Time Industries Association spokesman

Venues such as nightclubs, city centre bars, music venues have been amongst the worst affected businesses during the pandemic.

Social distancing, and particularly for busy city centre venues that would normally be standing room only at weekends for example, reduces the number of guests by around 75%. Therefore the income is reduced by 75%.

Other restrictions such as earlier closing times, ie, 10pm or 11pm, mean that the peak trading hours for late night businesses (normally 10pm to 3am) are largely eliminated. In normal times night time economy businesses would take a majority of income in those hours.

This net effect of this is that between reduced capacity, and reduced hours, (and often reduced activities to generate footfall, such as live music) these businesses have seen catastrophic reductions in income of 75% or 85% plus…. And that’s if they were allowed to trade. For some, such as nightclubs, they were not allowed to trade at all and so their income has reduced by 100%.

READ MORE: Ministers receive legal action threat to save Scots night-time industry which makes 19,000 Covid staff cuts

The average business in the sector has now run up some £150,000 per premises in debt over the last 12 months just to stay afloat. That amount represents the difference between their costs, ie, rent, utilities, staff wages, insurance, staff furlough costs, etc, and their income, ie, turnover from reduced trading and any grants received.

If restrictions such as social distancing continue for another 6 months, these premises would be closer to £200,000 in debt each, if they could find a way to borrow that additional money. However with no fixed date for reopening bank lending has dried up and companies are now at imminent risk of insolvency. Obviously when companies go bust all staff are laid off, and staff furlough ends, hence the jobs crisis.

These types of premises are usually in prime town or city centre locations, paying exceptionally high rents and other operating costs, and they employ a lot of staff. With hundreds of thousands of pounds a year in fixed costs – government support already ended – and no timetable to reopening at all for some and reopening viably (without restrictions) for all, the outlook is grim.

The Night Time Industries Association has warned that up to 24,000 jobs thought to be at risk within weeks, as a majority of struggling night-time economy businesses have now run out of cash to pay furlough contributions and ongoing fixed costs.

As most of these premises are in town or city centres, they are usually ‘landlocked’, and so do not have outdoor areas to partially compensate for the capacity restrictions that social distancing imposes. Our recent survey confirmed that less than a quarter of premises have licensed outdoor areas.

In addition the commercial debt moratorium that has prevented landlords from progressing winding up petitions expires in June. Around two thirds of premises are now between 3 and 12 months behind on rent or mortgage payments. Fewer than a third have been able to trade viably at any point in the last year, and almost all cannot reopen or trade viably while social distancing remains.

These businesses have now exhausted financial resources. Cash reserves have been depleted, more borrowing is now impossible with no guaranteed opening dates and businesses are rapidly running out of cash to pay their fixed costs and furlough contributions.

Our members have done the right thing, closed their previously successful businesses for the sake of public health, and gone deep into debt paying the enormous fixed costs and furlough contributions to keep staff employed for over a year now. We were the first to close and will be last to open. No sector has suffered more. But the Government have consistently taken our sector for granted and refused to engage meaningfully with our representatives.

Many of our members have been closed for over a year now, and virtually all have suffered crippling financial losses. In short, the money going out every month has been far greater than the money coming in, and government support has typically covered less than a quarter of this deficit. To add insult to injury government support has now ended while there is no end date to forced closure and other restrictions.

If the Scottish Government wish to protect the 24,000 jobs now at risk then there are really only two options, provide substantial and immediate additional support for as long as it is mandated that our businesses stay closed or have to operate under the restrictions that make them unviable, or provide a clear map with target dates for the end of all legal restrictions on capacity, activity, and opening hours.

If neither of those options are forthcoming then our First Minister is, in effect, asking thousands of small Scottish business owners to bankrupt themselves."