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Lockdown leaves Scottish hospitality with £1.2bn of debt

Hospitality businesses in Scotland have accrued up to £1.2 billion (US$1.6bn) worth of debt since lockdown began in March, according to a trade association.

Lockdown orders and closures have resulted in massive debts for Scotland’s bars

The Scottish Hospitality Group (SHG) said its members have taken on more than £16 million (US$21m) in debt in order to stay afloat during the Covid-19 pandemic. Across Scotland’s 16,000 licensed premises, the industry could be carrying a debt burden of between £800m (US$1bn) and £1.2bn.

It is expected that this figure will rise due to the worst-ever December trading figures and a shortfall in government support. According to SHG, financial aid has been lower than employers payments in national insurance, pensions and holiday in some cases.

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 [Scotland’s finance secretary] re-announce £25,000 (US$34,000) 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 [UK chancellor] admitting his £375m (US$508m) 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.”

During lockdown, businesses continue to spend on average nearly £6,000 (US$8,000) every week per premises on fixed costs and contributions to the furlough scheme. This expenditure comes despite SHG reporting that its members took in 20% of last year’s earnings during December and lost £9.6m (US$13m) of revenue.

The massive cut in revenue will impact 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.

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