HOSPITALITY leaders have said businesses are in a “worse position than Covid” due to a lack of support amid soaring energy costs and inflation, as they called for a lowering of VAT and increased rates relief.
Bosses from the Scottish Tourism Alliance (STA), Unite Hospitality and UKHospitality Scotland laid bare the challenges firms were facing during the cost-of-living crisis to MSPs on the Economy and Fair Work Committee on Wednesday as part of its pre-budget scrutiny.
All three insisted the situation being faced now is much more significant than during the pandemic, when thousands of businesses were forced to close completely for months.
And they pointed to a gulf in the level of support being offered during the Covid crisis now, with no financial assistance on offer beyond the Energy Bill Relief Scheme – which will apply discounts to firms’ energy bills between now and March 2023.
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The unions spoke of hotels being forced to shut over the winter period due to a lack of bookings, some being forced to repurpose or leave the sector entirely, and others having to lay-off workers.
Leon Thompson, executive director of UKHospitality Scotland, said businesses are facing a “completely unsustainable” situation and urgent support measures must be put in place.
He said: “I think as we came out of Covid, no one could have imaged we would’ve been facing a challenge of this scale. The challenges that face businesses now are much more significant.
“Businesses have been trying to move towards recovery and profitability, but we know that even over the course of the summer, only about a third of businesses were saying they were trading at a profitable level. We’ve got businesses carrying debt from Covid, we’ve got the cost-of-living crisis, it's a completely unsustainable situation.
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“A few months ago we were talking about inflation being a massive problem, then energy costs came along which just dwarfed issues businesses were experiencing.
“Members are saying bookings are incredibly low for autumn and winter. We’re moving towards Christmas which is incredibly important for hospitality and right now, there’s not much demand for Christmas parties and breaks. A lot of businesses are just scaling back their offer and considering whether they will stay open.”
Thompson added he would like to see the UK Government lower VAT to 10% and, if more support for businesses can be secured from Westminster, he would like to see the Scottish Government up rates relief via Barnett consequentials.
He added: “Beyond the energy rates, there’s not been anything [support] announced for business.
“We’re continuing to make the request to revisit VAT, we’d like to see it down at 10%. Similarly on business rates relief, from a Scotland perspective if that does come through in the UK budget, hopefully there will be some Barnett consequentials. These are the areas of support businesses need.
“We understand the financial challenges the Scottish Government has but it is one of the levers that is there for ministers.”
Bryan Simpson, industrial organiser at Unite Hospitality, explained how businesses have been seeing a huge reduction in footfall throughout the year and employees had seen their hours cut.
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He said: “We have been seeing since March a huge reduction in footfall which is impacting the businesses, the employers, and the workers too.
“A huge proportion of our members are seeing a cut in hours, some are seeing in some cases their pubs and bars closing. Big Hospitality did a survey showing seven out of 10 pubs on the brink and wouldn’t survive Christmas.
“The impact on workers is almost a double whammy because they are consumers too. They're being hit by energy costs and the cost of living crisis, and then they are being hit because their businesses can no longer afford to retain them.”
Pubs and bars are in a much worse position than hotels, the trio said, due to international demand.
But Marc Crothall, CEO of STA, warned demand was still plummeting and many smaller hotels have already decided to transform into residential properties.
He said: “The demand is without question falling off a cliff as we go into winter.
“It’s worse than Covid at the moment in terms of survival.
“We’ve already seen businesses take the decision to repurpose, change their viability from being a hotel to becoming a residential property. Smaller hotel businesses have tried to counter the costs and decided its better to come out of the sector."
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