Scott Wright: Is it all doom and gloom for pubs in Scotland?

Altus found that 383 pubs were lost to the trade over the period, with 230 of those closing their doors for the last time in the three months to June 30. It meant that, in England and Wales, nearly as many pubs closed forever in the first half of this year than over the whole of 2022.

Although the figures related to the industry south of the Border, the pub trade in Scotland is blighted by many of the same issues that are affecting its counterpart south of the Border. Indeed, there is an expectation that further closures are on the way in Scotland, as operators continue to grapple with high costs and consumer confidence made fragile by persistently high inflation and interest rates.

“I think there could be closures ahead due to the unprecedented challenges that we have got in front of us,” said Murray Lamont, president of the Scottish Licensed Trade Association. “Without a doubt, there will be closures around.”

Mr Lamont, whose family own the long-established Mackays Hotel in Wick, told The Herald: “It is difficult for people to see a light at the end of the tunnel because there are still some pubs that will be affected by their Covid debt. That is still there.

“The difficulty in staff recruitment is a problem. That is probably affecting opening times, which again affects trading and takings.

“Tourism seems to have been pretty good, which is helpful. But the spend is probably not as good as it was before Covid. We are still not back at the levels that we had enjoyed before… which is a challenge.”

Perhaps unsurprisingly, the attention of operators is fixed firmly on action that could be taken to ease the plight of an industry which has endured a miserable time since Covid emerged in early 2020.

Hope that pubs and restaurants would rebound sharply after Covid restrictions were eased have since been dampened by a raft of headwinds, from soaring energy, labour, and food and drink costs to the impact of rail strikes and the steady rise in interest rates. We will find out today if the cost of borrowing is to rise further when the latest decision of the Bank of England’s Monetary Policy Committee is announced.

In England, the pub industry is now lobbying for extended relief from business rates when Chancellor of the Exchequer Jeremy Hunt presents the Autumn Statement.

Pubs in England currently benefit from 75% relief from rates, up to a cash limit of £110,000 per business, as part of a package worth £2.1 billion put in place by the UK Government for the retail, hospitality, and leisure sectors for the 2023/24 financial year.

While there are calls in England for the relief to be extended, so far the hospitality industry in Scotland has had no such benefit.

Hospitality campaigners in Scotland have long been calling for the Scottish Government to offer the same level of relief but have been routinely disappointed. The Scottish Government says its current support package means that around half of firms in the retail, hospitality and leisure sectors in Scotland will not pay rates in the current year because of the “most generous small business relief in the UK”. But that seems to have cut no mustard with the hospitality industry.

Mr Lamont also raised the prospect of the UK Government stepping in to help with a cut to value-added tax (VAT) as he told The Herald: “It would be good if we could get help from government in terms of perhaps a reduction in VAT or rates. That would certainly help. Because once these pubs close, they are very unlikely to open again.”

He added: “There is not enough help. There should be more help.”

Any hope that First Minister Humza Yousaf would address the rates issue was dashed when he announced his new Programme for Government earlier this month.

“Not receiving the 75% was a bitter blow for businesses,” said Leon Thompson, executive director of UKHospitality in Scotland.

“Counterparts in England and Wales have been able to use this to see off some of the worst effects of cost rises linked to inflation. Even though, businesses are closing, with publicans handing back keys to landlords.

“With the Autumn Statement coming in November, we are working to ensure the UK Government continues to recognise the challenges facing our businesses by providing ongoing support. It will be vital that if any is given the consequentials provided to the Scottish Government be used to support Scottish hospitality businesses.

“Many of our businesses saw the valuations on their properties increase this year, despite the major financial headwinds they are facing into. With inflation still high, there is concern that an inflation-linked hike [in business rates] could hit them as bills start to reach them in April next year.”

Business rates are not the sole worry of the industry north of the Border, of course. Concern has also been raised over the introduction of low emission zones in cities such as Glasgow, where the prospect of a congestion charge for motorists coming into the city from suburban areas is to be considered.

“Glasgow city centre remains particularly hard hit,” Mr Thompson said.

“The LEZ (low emission zone) there and the idea for a congestion charge are only making things worse. The LEZ has made it harder for taxis to drop and collect customers to hospitality venues. This is a real problem later in the evening, with the lack of easy transportation putting people off. It also makes life harder for our workers. Those that need to drive now face penalties adding to their cost-of-living crisis.”

Yet despite the many headwinds the trade faces on the operations side, parts of the sector are reporting strong demand, albeit that is not necessarily translating into profits because of increased costs.

In response to a recent article in The Herald, that reflected on the collapse of celebrated chef Brian Maule’s award-winning restaurant in Glasgow and the upmarket Mar Hall Hotel in Bishopton, Jon Harris, sales director of wholesaler Hallgarten & Novum Wines in Scotland, said he recognised the pressures the industry is facing. But he observed that “there are also a good number of success stories too”.

Mr Harris posted on LinkedIn: “The atmosphere in the trade and the country (Scotland) as a whole is pretty negative, [but] we have to be careful it doesn’t become self-perpetuating. I work up and down the UK trade and it’s not all doom and gloom.”

One operator which is certainly looking forward with confidence is Ayrshire-based Buzzworks Holdings. Yesterday it underlined its ambitions to expand its portfolio after revealing it was trading ahead of expectations, boosted by the impact of recent openings such as Scotts restaurant in Greenock.

“It’s been a challenging climate for hospitality operators for some time and we’ve not been immune, but the tailwind of opportunity is here and we plan to catch it,” declared managing director Kenny Blair.