Furlough costs hospitality firms double what they receive in grants

Stephen Montgomery

The Scottish Hospitality Group has called on the UK government to improve the furlough scheme after it emerged its members are – on average – paying the UK government around £150,000 per week in National Insurance contributions* while receiving just £66,000 a week in financial support.

Stephen Montgomery, spokesperson for SHG, said, “It is complete madness that there’s a whole bureaucratic set up that moves money around like this to no-one’s benefit. We suspect that most of the public have no idea that furlough actually costs businesses a lot of money. It is certainly not free.

“If you think of furlough as being the roof of a house, unless there is a secure foundation below, the roof will collapse. With hospitality shut since the end of December, businesses are running out of cash to plug the gap and sooner rather than later they are going to have some difficult decisions to make. It would be far more efficient and beneficial to waive NI contributions and for the government to develop a sensible and long-term sector-specific furlough scheme.”

He continued, “NI isn’t the only cost to businesses when their staff are on furlough, there are pension contributions and holiday accruals they need to think about on top of property rent, utilities and equipment rent. There is only a certain amount of time businesses can keep burning cash like this, and with no firm date for when restrictions will be eased, improved support from both the UK and Scottish governments is now more important than ever to help businesses across the hospitality industries keep people employed and map out a sustainable return to viable trading.”

The call from the SHG comes as a report covering the whole of the UK shows that the hospitality sector is forking out £542m a month in support of the furlough scheme. The figures are based on analysis by Catton Hospitality’s labour-scheduling management system, S4Labour, which commented “it is clear furlough is not the free lunch it is sometimes portrayed as”, and that retaining staff “comes with a cost and it is no insignificant amount”.

The Group, whose members employ over 6000 people, has also finalised its manifesto for how the government and industry can work together. It calls for immediate support to allow viable businesses to survive and sets out the measures required to restore jobs and keep the industry alive to lead the economic recovery. Key demands include waiving business rates until at least March 2022, supporting a permanent reduction in the VAT rate to 5% on food services and accommodation and introducing specific grant schemes to help the hardest-hit sectors especially drink-led venues, nightclubs, and wedding venues.

Stephen Montgomery added: “It’s crucially important that the Scottish Government continues its dialogue with industry to ensure Scottish hospitality businesses are adequately supported throughout this pandemic and are in a strong position to support the country’s economic recovery. Our manifesto is the first step in setting out what the sector needs from the government and we hope that the Cabinet Secretary for Finance and the First Minister will listen closely to our proposals.”

*The figures are based on staff costs from July to December, inclusive.

Category: Coronavirus, Editors' Picks
Tags: furlough, hospitality, Scottish Hospitality Group, SHG, Stephen Montgomery