Hospitality sector may be sitting on £1bn of debt
Montpeliers, part of the SHG which has a mountain of debt
Scotland’s hospitality sector could be sitting on a debt burden of more than £1 billion, according to new figures.
Companies in the Scottish Hospitality Group alone – representing 200 venues and 6000 staff – have borrowed more than £16 million since lockdown began last year to allow them to stay afloat.
SHG estimates that if all of Scotland’s 16,000 licensed premises were in the same position as SHG’s members, the industry as a whole would be carrying a debt burden of anywhere between £800m and £1.2bn.
It is expected that this figure will rise significantly due to the worst-ever December trading figures and a major shortfall in government support, which in many cases is lower than what employers have to pay in National Insurance, pensions and holiday accrual.
The debt is a combination of CBILS (coronavirus business interruption loans), bank loans, overdrafts and payment deferrals and is necessary to pay property and equipment rent, among other fixed costs. Servicing and repaying the debt will severely impact on firms’ ability to bounce back from the pandemic and to invest for recovery.
Stephen Montgomery, spokesperson for SHG, 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.
“It’s another reminder of why both governments need to stop playing politics with lifeline support for the sector.
“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 £375m wasn’t new money.
Stephen Montgomery: members paying a heavy price
“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.”
Last week, SHG reported that its members took in only 20% of last year’s earnings during December. The figures mean that SHG members lost £9.6m of revenue – money that would normally keep businesses alive until the spring.
During lockdown, businesses continue to spend on average nearly £6000 per week per premises on fixed costs and contributions to the furlough scheme.
The massive cut in revenue will impact on payments for property rent, utilities and equipment rent until at least the summer, affecting suppliers, investors such as pension funds, and others who depend on the industry.
Combined with the growing debt burden, it will also throw into doubt existing plans for £30m of investment in 27 premises which would create hundreds of new jobs as well as protecting existing ones.
The Scottish Hospitality Group comprises many of the country’s largest and best-known restaurant and bar businesses, including The DRG Group, Buzzworks Holdings, Signature Pubs, Montpeliers, Manorview Group, Lisini Pub Co, Caledonia Inns, G1 Group, The Townhead Hotel Lockerbie, Mor-Rioghain Group, and Caledonian Heritable.
It has a combined turnover (in normal times) of £275m, with 200 venues and 6000 staff (of which 1500 are under 25).