Scotland's pubs and restaurants cut opening hours as ‘tidal wave’ hits

More than half of Scotland’s pubs and restaurants cut down on their opening hours in January in an attempt to ride out the “tidal wave of economic challenges” threatening to drown much of the country’s hospitality sector.

Survey results seen exclusively by The Herald reveal that three out of five outlets have scaled back operations to combat rising costs that include surging energy prices, steep wage increases and rampant food inflation. This comes after a lacklustre festive season – usually the industry’s busiest time of the year – with half of venues still in decline versus the “norm” prior to the pandemic.

Business owners across the spectrum of Scottish hospitality have voiced grave concerns about their ability to carry on as double-digit inflation coincided with the end of temporary rates relief and the return of VAT charges to the full 20 per cent, undermining profitability despite the recovery in patronage since the lockdown era.

Kris Clark of the family-owned George Hotel in Inveraray said the traditional yardstick of turnover being a good indicator of financial health no longer applies. He and others are being forced to “change the formula” to adapt, but there is a limit to what can be done.

“I live in Perthshire, and I drive from Inveraray to Perthshire very regularly,” Mr Clark recently told The Herald. “There are 16 venues between Inveraray and Perth, by which I mean a venue with rooms, so like a restaurant or a bar with rooms [for overnight guests].

“During early autumn of last year there were only eight of those venues open, and I guarantee if this continues there will be very few that stay open.”

He added: “It’s very depressing doing my journey because people just cannot afford to open, so [government needs] to help us, otherwise the whole hospitality industry is going to go down the tubes.”

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His comments echo the findings of the snapshot survey released today by the Scottish Licensed Trade Association (SLTA), in which 60% of restaurant and bar owners said they will not operate to their full opening hours in the first quarter of this year in a bid to cut down on staff and energy costs. Many also said they have had to cut back because of a shortage of staff post-Brexit.

“We previously warned that it wouldn’t be economically viable for many outlets to remain open and we are now seeing this come to fruition with a knock-on impact on tourism and Scotland’s wider food and drink sector, including the supply chain,” SLTA managing director Colin Wilkinson said.

“As we enter the second month of 2023, three out of five outlets are operating restricted hours with rising costs, staff shortages and enormous increases in energy prices – 45% of our respondents reported energy increases of over 250%.”

Mr Wilkinson said members are also concerned about the impact of Scotland’s deposit return scheme which is due to come into force on August 16. It is further feared that proposed restrictions on alcohol advertising sponsorship will impact on many everyday aspects of pub life.

Colin Wilkinson (Image: SLTA)

More than a quarter of those questioned said government support is “urgently” needed, primarily in the form of relief on taxes known commonly as business rates which help to pay for local council services. There are also continuing calls for a cut to VAT, particularly as it is applied to food and drink purchases.

A reduced rate of VAT of 5% for hospitality firms was introduced by the UK government in July 2020 to support the industry through the worst of the Covid pandemic. The rate rose to 12.5% in October 2021, and returned to the full 20% in April 2022.

Meanwhile, a 100% relief on business rates came to an end in Scotland on March 31 of last year. This was replaced by a temporary 50% relief that was available in April, May and June – capped at £27,500 per rate payer – that has also now come to an end.

The esoteric issues around business rates have long been a bone of contention for the hospitality and wider small business sector, with complaints of a disproportionate impact on firms of different sizes across different regions. There is a long-standing campaign for it to be scrapped and replaced with a fairer system.

READ MORE: Cost fears as 'supposedly enlightened' bottle return scheme approaches

Brian Flynn, founder and co-owner of Behind the Wall in Falkirk, said this is one area that “could definitely be addressed”. He noted that as businesses are reducing operating hours or closing down sections of their establishments, they are not getting full use out of all of the public areas for which they pay taxes.

“Our business is not always fully open – we have got areas that we close down during the week so that we keep everybody warm and cosy in the main seating areas, so we don’t use all of it all of the time,” he said.

Brian Flynn (Image: BTW)

Mr Wilkinson said the industry needs support if firms are to survive the “tidal wave” of economic challenges: “Christmas/New Year 2022 was the first time since 2019 that our pubs and bars were fully open without Covid restrictions, but the feedback in our survey shows that half of outlets were still in decline versus the last ‘normal’ festive season trading period.

“Adding in increases in rates, operating costs, staff shortages and uncertainty on energy, we urgently call on local and national governments to help our sector, and the associated jobs in the wholesaling, brewing/distilling and food-producing sectors.”

Tomorrow: The major change veteran hospitality operator believes would boost trade