Culture, Tourism, Europe and External Affairs Committee - 17 December 2020
The Convener (Joan McAlpine): Good morning, and welcome to the 33rd meeting of the Culture, Tourism, Europe and External Affairs committee in 2020. Apologies have been received from Beatrice Wishart and Dean Lockhart. Our first agenda item is evidence on the impact of Covid-19 on the hospitality sector. I welcome to our meeting Willie Macleod, executive director for Scotland of UKHospitality; Stephen Montgomery, spokesperson from the Scottish Hospitality Group; David Weston, chairman of the Scottish Bed and Breakfast Association; and Bryan Simpson, industrial organiser of Unite hospitality.
Thank you all for joining us this morning and for the briefings that you prepared for us in advance, which have been very useful. I will begin with the first question, and I will be followed by the deputy convener, Claire Baker. As you know, the committee has been looking at the impact of Covid on the tourism sector for some time—in fact, from the beginning of the pandemic—so we are well aware of how much the sector has suffered. Office for National Statistics figures that were published only today show that Scotland has lost 18,400 jobs in hospitality and food services alone during the pandemic. Gross domestic product data obtained by the Scottish Parliament information centre shows that accommodation, food services, arts and culture and recreation are recording declines of around 30 per cent in GDP, which is way above the much more modest declines in other sectors of the economy.
Given that context, could you each briefly—for a couple of minutes, perhaps—outline how the businesses and workers that you represent have felt the impact of that decline, and can you reflect on the particular difficulties that you are experiencing during the second wave of the pandemic? Stephen Montgomery can start. Stephen Montgomery (Scottish Hospitality Group): Good morning, committee, and thank you very much for asking us to be here today. Nobody would argue about the fact that hospitality in Scotland—and across the United Kingdom—has been hit more than any other sector. The Scottish Hospitality Group represents 203 different businesses with 6,000 employees and a turnover of £275 million per year. Let us consider the opening and closing costs alone. On average, it costs £2,427 every time a business has to close and £2,418 every time it opens. Furlough top-ups cost £2,845, and fixed costs
are £2,938. Businesses get only £2,773 per month, on average, in grants, which does not go anywhere near covering all those costs. There are effects on businesses—both on finances and on mental health—and there is a vast issue within the hospitality industry. Tourism and hospitality must be defined as, and divided into, two different sectors. Although the sectors combine, I make it clear to the committee that, without one or the other, there is nothing.
Opening and closing, and the lead times for those decisions, has an effect on businesses. It does not help when we are given last-minute guidance on a Friday with instructions for what is to happen on Monday. The Government has been slow to engage with the trade bodies, which has had an effect on our ability to get out information to the trade. That has had a major effect on where we are. Looking forward, it will be a long time before hospitality
gets out of the current situation. We are looking at probably 18 to 24 months before we see the next stage. I do not think that we have seen a difference between the first and second waves. We have
been in decline from day 1, since the beginning of April, and we are still seeing a decline now. We are seeing job losses—hospital cases are rising, but our hospitality businesses are closing daily. We need some very serious interventions from the Scottish Government and the United Kingdom Government. It cannot be one or the other; it has to be both, because
this is not just a Scottish problem but a UK problem, too. The Convener: Thank you, Mr Montgomery. We are the tourism committee, but we are having a session on hospitality because we take it very seriously indeed and see it as very much part of, and in working tandem with, the tourism sector. Does Willie Macleod want to give us his summary of the situation? Willie Macleod (UKHospitality): Thank you, convener and committee members, for having us along today. We appreciate the opportunity to enlarge on the written evidence
that we have submitted. Stephen Montgomery and I work closely together, so I fully endorse a lot of what he said, but I will enlarge on some of his points. We experienced a bit of a respite after we were able to reopen in July, when hospitality—not necessarily in the cities, but in other parts of Scotland—experienced a bit of a resurgence in demand as people started going out to eat.
We were significantly helped by the eat out to help out scheme, and people travelled from throughout the UK and within Scotland to have holidays in self-catering accommodation and in more rural hotels rather than in cities. It is fair to say that the cities—not just hotels, but bars and restaurants—have been absolutely devastated by what has happened. There has been a total absence of international tourism and travel, and the fortunes of tourism are very much tied up with the fortunes of the aviation industry. I will glance at some figures just now, because I have not committed them to memory—they are the industry forecasts for Glasgow and Edinburgh next year. For the first quarter of next year, occupancies in Glasgow will probably be between a quarter and a third of what we would normally expect them to be. The position is similar for Edinburgh. The important industry metric of RevPAR—revenue per available room—is showing figures for the first quarter of next year that are barely enough to cover the cost of production, if you like: the cost of having a room lying empty.
Looking forward to the second quarter and subsequent quarters of the year, the picture is still pretty bleak. That is an endorsement of what Stephen Montgomery said. Many businesses are looking towards recovery, as we are a resilient industry and we will get up and moving quickly when we are able to reopen fully, but most businesses are not looking at anything like a buoyant recovery in 2021, and many say that they do not expect to achieve break-even until 2022. All that depends on getting Covid under control not just in the UK and Scotland, but internationally. That needs to happen before hospitality will begin to recover.
The Convener: That is a very bleak picture indeed. David Weston, is the situation similar for the bed-and-breakfast sector? David Weston (Scottish Bed and Breakfast Association): Thank you for inviting me. Yes, it is a similar situation for the bed-and-breakfast sector. In Scotland, there are between 2,500 and 3,000 B and Bs and guest houses, and they are microbusinesses that are owner managed. The direct turnover is about £250 million, though, of course, they normally make a much higher economic contribution to the Scottish economy through the supply chain and guest spend locally.
They are very important to the economies of rural coastal and island communities, where they are often the only accommodation. In a survey at the beginning of October, we asked our members to forecast their 2020 turnover, and the average forecast was that that would be down 60 per cent on 2019. That survey was done at a relatively optimistic point, and, since then, there have been a few knock-backs. If we did the same survey today, the figure might be even higher.
These businesses have been badly affected even in areas where they are allowed to open and at times when they have been allowed to open, because, of course, their guests are not local but are coming from other areas of Scotland as well as from England and Wales. As Willie Macleod said, normally, guests would also come from abroad, but we have totally lost that business. Therefore, even B and Bs and guesthouses in areas that are relatively unrestricted have been drastically affected, because their guests would come from restricted areas. Because B and Bs are microbusinesses, they often fall between two stools with regard to being eligible for help. Many B and Bs have not yet had any financial help. That might be because they are not on the business rates list—they pay council tax. About 49
per cent of our members pay only council tax. They may not be categorised as use class 7, which is hotels, under planning law. Many small B and Bs do not even have a business bank account, which has caused problems in accessing some of the financial help that is available. People who are self-employed have typically found that, because of the seasonality of the business, they have not been able to access much help, even though they are eligible for it, because the self-employed help was based on an average of 12 months’ earnings. For the same reason, people who invested in their businesses and therefore made less profit got less help under that scheme when the downturn came. Therefore, that was not enough to support them.
Accommodation bookings in our industry are often made well in advance, so it can be a difficult process if a property has to cancel bookings, and it takes even longer to re-establish bookings once it reopens. People do not just come back. When a business reopens, it has to start marketing again and must refill its rooms. Inevitably, with that opening and closing, businesses lose some turnover. Therefore, yes, they have been drastically affected.
The Convener: Bryan Simpson, you have submitted a rather stark paper on the effect on workers. Can you summarise that in three minutes? Bryan Simpson (Unite Hospitality): I thank the committee for bringing Unite hospitality to this important discussion. It will be difficult to summarise the paper in three minutes, but I will try. It is a
similarly bleak picture to the perspective that has been given by my colleagues. From the workers’ perspective, it has been cataclysmic. Nothing else comes close to the effect on hospitality workers. We estimate that there have been around 50,000 job losses in Scotland in tourism and hospitality. That is based on information from Fourth, which is the largest
system that supports workers in the industry. It estimates that there has been a 26 per cent reduction in employment. Based on the latest figures for how many people are employed in the industry, that would mean job losses of 650,000 across the UK. Based on the ONS
figures, which equate Scotland’s hospitality employment population at 9 per cent of the total, that would come to 58,000 job losses, which is a pretty shocking figure—and the situation affects young workers, women and migrant workers more than other demographics. The other issue concerns those who are “lucky” enough still to have a job and to have been furloughed. They are receiving 80 per cent of the minimum wage, which for some people is £4.75 an hour. Someone who is young and who is paid what we would regard as discriminatory youth rates is having to survive during Christmas on less than £5 an hour on the furlough rate. We do not believe that there has been sufficient support from the UK Treasury directly for workers. Many of the issues that we will touch on today relate to the money that is going to employers not trickling down to the workers who need it the most, whether that is furlough money or the other financial support that they receive.
Regarding the second wave, there are on-going issues with health and safety, with workers not being properly protected. There are on-going issues in the workplace, with workers not receiving furlough and employers either unable to access the furlough scheme the second time around or refusing to use it until March 2021. I will leave it there for now. The Convener: I will pick up on your points about furlough. You mention in your paper that the decision to extend furlough came very late and very suddenly. How many jobs do you think were lost because of the lateness of that decision? Bryan Simpson: Out of the thousands of members we represent, we lost in the region of 4,000 workers through redundancy in Scotland between August and the end of October. Those workers’ contracts were terminated on the basis that the employer
could not afford to retain them. From September, they would have had to contribute 10 per cent and then 20 per cent towards the furlough scheme. That was the fundamental reason that was given to those workers for their contracts being terminated. The Treasury’s decision
to extend the furlough scheme at the very end of October—I believe it was 48 hours before the cliff edge—and its further extension to March being decided only on 5 November resulted in thousands of jobs being lost. Those workers could absolutely have been saved had the Treasury not tapered off the furlough scheme and made employers contribute towards it. As a union, we want employers to contribute towards the furlough scheme, but to obligate small businesses to do that when they absolutely cannot afford it has meant that thousands of jobs have been lost. That, combined with complete inaction and a delay in action by the Treasury, led to the loss of thousands of jobs in Scotland alone. The Convener: Thank you for setting out what is a very grim picture indeed. Claire Baker (Mid Scotland and Fife) (Lab): I wish to ask Bryan Simpson some more questions about the furlough scheme. The paper that has been provided by Unite hospitality contains
some serious allegations about businesses that used the hospitality scheme to fund business packages. Was that more widespread than the businesses that you have highlighted? I have a further question about conditionality. There have been significant sums of public money from the UK and Scottish Governments. Do you think that there has been sufficient scrutiny? Is any conditionality attached to how those resources are spent by businesses? Bryan Simpson: We have a plethora of examples of the misuse of furlough. I will focus on the largest companies, many of which are international or multinational. We believe—well, we know—that some of them have used furlough to reduce their costs by terminating workers’ contracts instead of using it to retain workers. For example,
Holiday Inn, which is a well-known brand with hotels at Glasgow airport and Edinburgh zoo—two of the largest hotel units in Scotland—terminated more than 100 contracts per unit at the end of August, despite knowing that the furlough scheme was going to continue until at least 31 October. The company refused to use the extended furlough scheme and terminated the workers’ contracts at the end of August. It then used the furlough money to pay 80 per cent of the notice pay for their continued employment under their notice agreement. It did not need to do that.
It could have undertaken what is known as payment in lieu of notice, whereby workers’ contracts are terminated with immediate effect and they are paid 100 per cent of their notice pay. Instead, Holiday Inn has used the furlough scheme at its Glasgow airport and Edinburgh zoo hotels, in some cases until January and February 2021. It took advantage of the furlough scheme: rather than using the scheme to retain workers, as it was intended to do, the company used it to reduce its costs in respect of the notice period. The workers’ contracts were terminated at the end of August but they were kept on the books. In some cases, they
will remain on the books until as late as January or February 2021, because that keeps the company’s costs down. Claire Baker asked a great question on conditionality. From our perspective, there has not been enough scrutiny of that public money and how it is spent, whether under the furlough scheme or through the grants that are given to businesses. As a trade union, we have always made it clear that the support should be conditional on decent employment practices. I appreciate that, in general, Governments should not be telling employers what they can and cannot do, but, when it comes to public money, they absolutely should. If employers are saving tens of thousands of pounds through grants
and financial support, there should be conditions attached to that support—for example, that they should pay the real living wage or that they should not use zero-hours contracts or discriminate in the payment of wages on the basis of age. Those policies are all supported by the Scottish Government and the business pledge commitments to ensure the use of fair employment practices. We firmly believe that they should be applied as conditions attached to any public money that is given to employers, but unfortunately that has not been the case.
Claire Baker: Thank you for that, Mr Simpson. Convener, I am happy to declare that I am a member of Unite the union—I am aware of the concerns that it has raised in these matters and have had some involvement in local issues that are relevant to the answers that Bryan Simpson has provided. I want to ask Willie Macleod and Stephen Montgomery about what happened in the hospitality sector over the summer. I understand that businesses invested quite a bit of money in making their premises safe—for instance, by spending money on screens, signage and other such things. How did you feel about the sector subsequently being identified as a problematic area? Do you understand why the current restrictions have been placed on the sector? Do you think they are reasonable? Willie Macleod: Shall I take the lead on that? Claire Baker: Yes, please do. Willie Macleod: The sector has spent a large amount on investing in safety and other measures for staff, customers and, by implication, the surrounding communities.
The research that we undertook suggested that, at UK level, the wider hospitality industry has invested about £900 million—not just in screens and personal protective equipment but in training staff, changing operating practices and accommodating reduced capacity to cope with social distancing. We believe that we have created a safe environment for staff and customers. We are yet to be convinced that the hospitality sector is responsible for the level of transmission of infection that has been suggested. There is feedback from people who have been interviewed under the test and protect system to say that they had been in a hospitality setting, but the same research does not say that the hospitality setting was responsible for transmission of infection. Indeed, research that we—and individual companies—have undertaken suggests
that the incidence of Covid infection among staff and customers that is directly attributable to the hospitality business is fairly low. Claire Baker: Can Stephen Montgomery comment on that and on whether the restrictions that are in place at the moment are reasonable and proportionate to the risk that is posed by the sector? Stephen Montgomery: [Inaudible.]—hospitality on around 15 July. Everybody was geared up; one of our members spent £250,000 on 20-odd sites. The things
that we have put in place protect not only our customers but our staff. We are the only places that have track and trace or trace and protect—whatever you want to call it—and we have undergone the trials on the new system that the Scottish Government has brought in with the national health service. We had the eat out to help out scheme in August, which was then blamed for the rise in cases, although we do not think that it was responsible, because we can have only so many people in premises at once. Between 15 July and 30 September, the Scottish hospitality group as a whole, which has 6,000 staff, served 1.8 million customers, but we had only 17 positive cases.
That tells you clearly where we are, as far as safety is concerned, in the approach that we have taken. We also made a freedom of information request to the Scottish Government—which we have yet to hear any comeback on—to seek evidence on what has come of all the restrictions that have been put in place. We have five levels in Scotland. We do not see why we are being restricted to 6 am to 6 pm or 8 pm opening, or to a 10 o’clock curfew, because those hours are arbitrary. If we take level 3 area opening times of 6 o’clock in the morning to 6 o’clock in the evening, those hours are arbitrary because, between 6 o’clock and 10 or 11 o’clock in the morning, no one is open. Those lost hours could be added later in the day in order
to give us extra trading. As far as protection is concerned, there is no difference, because we have gone way above every other sector to make our places safe. I endorse everything that Willie Macleod said on that. I use the following example all the time. Someone gets on a bus to Glasgow, goes around five or six shops, comes home and decides to go to the pub. Four or five days later, if they have contracted Covid, test and protect will ask where they have been. They will not
remember every shop that they have been to, but they will always remember going back to the pub, which is where the infection is traced back to, so we get lumbered with that. However, there is no evidence to say that there is onward transmission from any of our hospitality venues, so that needs to be clarified. If there is evidence, please release it and let us see it. If that is the case, we can take extra measures to make sure that we are even safer. Ross Greer (West Scotland) (Green): I have a couple of specific questions for Bryan Simpson, but before that I will ask a short question of everyone on the panel about access to Government, to get a sense of how you have found communication with the Scottish Government. If you have requested meetings with or sent written correspondence to ministers, have you heard back from them? Have meetings taken place? Have you found that access to the Government has been available to you during the pandemic? Stephen Montgomery: I will go first. Government interaction with
the SHG and wider trade bodies has been slow from the start. We called from the start for proper engagement, consultation and meetings and for a seat at every table where hospitality is discussed. We have not been given that access. As you will know, a legal challenge has been brought and is on-going, so I cannot say much about it.
Consultation must happen far sooner. Information about Covid protection levels and the guidance that went with those came out on a Friday night and was to be implemented on the following Tuesday. My colleague Willie Macleod and I, along with representatives from two other trade bodies, spent the whole weekend putting together a proposal about the levels and how we could trade in those conditions. It was ignored. A lot of guidance still comes out at the last minute. That gives us little time to let our operators and business owners know what must be put in place. Willie Macleod will back that up. We usually get information late on a Friday night about action that is needed
on Monday morning. When we write to the Government our letters are given case numbers and we often get a reply, depending on which department we write to. However, as I said earlier, we submitted a freedom of information request in early November and are still waiting for an answer to that halfway through December. We are seeking clarification on that.
Willie Macleod: I have a slightly different view of our engagement with Government at the beginning of the pandemic. My experience has been that ministers and cabinet secretaries have been accessible. They have listened and we have engaged and communicated. As things became busier, we lost track. I endorse what Stephen Montgomery said. Changes, new regulations and restrictions have often been communicated at short notice, which has given businesses little time to prepare. There is a distinction between engagement and meaningful consultation. I am not implying any criticism of the officials whom we have dealt with,
who have been professional, patient and engaged. They have taken time with us, sometimes over weekends, to engage with us. Stephen Montgomery alluded to the legal action that we have initiated against the Government, which is on-going. We took that action because we felt that meaningful communication was not taking place at Government level. We were concerned about the procedures that Government was adopting. I do not want to go into detail about the legal action in a public arena because
the exchanges are on-going, but our most recent letter to the Government seeks improved engagement, consultation and procedures. There has been some improvement in engagement during recent weeks and there has been more meaningful consultation. This week—although we are still to see the final outcome—we have spent a lot of time with senior Government officials trying to work out a programme of financial support that we hope will be announced soon. We have contributed a great deal of
time and so have Government officials. There could still be improvements. David Weston: I echo what Willie Macleod said. The SBBA is a small trade association but, since the crisis started, we have had frequent meetings with Cabinet Secretary Fergus Ewing, through our membership of the Scottish Tourism Alliance. He has always listened to what the sector is saying. From our perspective, and as Willie said, officials have been very helpful and diligent. As, I am sure, other trade associations find, however, we find that our members are often talking to us in despair. They are in dire situations, with existential threats to their
businesses and livelihoods. When we pass that on to the Government, the people whom we talk to listen and understand, but things then seem to disappear into a black hole. There is a lot of very slow decision making, and we do not hear results for some time. That is difficult. I understand all the problems that the Government in involved in, of course,
but we do not necessarily hear what is being decided or the timings of when we are going hear answers on anything. Another brief point, which we have made to the UK and Scottish Governments, is that it would help very much if draft wording of new guidelines were to be run past trade associations. That would save an enormous amount of questions, time and problems afterwards, because we could help to clarify and improve the wording. We often find that we feed in early on, then the Government issues wording and immediately there are a huge number of questions from our members, who ask, “What does this mean?”, “What does that mean?” If the trade bodies had seen drafts, we could have fed back to help to clarify the wording. That would help Government, us and the industry. I hope that that lesson can be taken on board. One positive thing has been the increased and more frequent dialogue that the industry has had with ministers and officials during the crisis. I think that Government has learned
more about how the hospitality sector works and, in particular, about the value of hospitality to the Scottish economy. I hope that that will help us all in the future. Bryan Simpson: Having listened to the other witnesses speak about the lack of engagement that they have had, I would say that the union has had even less. As the largest trade union for hospitality and tourism workers, we are the representative of the hospitality workforce in Scotland. Obviously, I do not know what engagement all my colleagues have had, but my understanding is that we have had only one piece of engagement with senior civil servants, which was around the second lockdown in Scotland, in October.
Even that happened after the lockdown was announced. There was no consultation, meaningful or otherwise, with Unite hospitality or Unite Scotland on the specifics of the hospitality industry, which has been worst affected. I have written to the cabinet secretaries with the remits for culture, fair work and tourism—Fiona Hyslop and Fergus Ewing. The response that I got was quite disappointing; I felt that it was a template response. I had specifically raised quite serious concerns about how Scottish hospitality employers were misusing the coronavirus job retention scheme, so I was making a specific point. The template response that I received simply listed what
the Scottish Government had done in terms of financial support for the industry, which is not what I was asking about. That was disappointing. We have also written to the First Minister, albeit only a few weeks ago, to call on her to support our call for a minimum wage floor for hospitality workers, to ensure that no worker is having to live on 80 per cent of what were already poverty wages. We have not received a response, but I appreciate that the First Minister is very busy.
The engagement with the union has not been good. I would say that it has been even worse than it has been for the industry, which is sad, because I like to think that we bring a different perspective to the table—that of representing the workers who, at the end of the day, are worst affected by the crisis. Stephen Montgomery: On the back of something that Willie Macleod said, I want to put on record that I pay tribute to the cabinet secretary, Fergus Ewing, for his constant dialogue with me and with Willie. I know that I can pick up the phone any time
and speak to him, which is good and very welcome. There has been a lot of dialogue with officials, which Willie Macleod mentioned. The point that I was trying to make earlier was that the lead-in times to such discussions are often not long enough, and the discussions are very last minute. I want to place that on record. David Weston alluded to the value of hospitality. Pre-Covid, I think that a lot of people, when they looked through the windows and doors of hospitality premises, saw busy restaurants, pubs, clubs and bars and thought that it was a busy sector. Let us not be fooled by that;
hospitality was not in a great place before Covid, and it is in an even worse place now. Now that we have ministers and the Government inside the bars looking out the windows, they are seeing how bad a place we were in pre-Covid, and it is even worse now. I do not want to appear to be damning everybody in the same way; there has been engagement, but it has not come early enough, and lead-in times needs to be longer. Ross Greer: As indicated, I have a number of other questions for Bryan Simpson, but I am conscious of the time. Would you like me to go ahead with those questions now, convener, or do you want to bring in other members and come back to me if there is time? The Convener: I will try to bring you back in later. The
first part has taken longer than any of us anticipated. If answers could be as succinct as possible, we can get through as much as possible. Christine Grahame (Midlothian South, Tweeddale and Lauderdale) (SNP): I will take a different tack. Earlier, we heard evidence—I think it was from Willie Macleod—that city hospitality has been especially badly hit. I agree that it has been badly hit, but evidence from research, and from my own inbox as an MSP for a rural area, suggests that rural hospitality has been even worse hit for a variety of reasons. It is usually
the major employer in an area with little employment diversity. I am thinking of places such as the Peebles Hydro or the Macdonald hotel, although there are also smaller independent hotels, caravan sites and bed-and-breakfast places. The situation has been exacerbated by the cancellation of major local events, including agricultural shows and common ridings.
Indeed, the economic damage probably extends even further, to the supply chains, which are usually local, and local taxis, and so on. Therefore, the economic loss is kept within the community. Do the witnesses agree? If so, should the support that is given to rural hospitality be different to that given to city hospitality? Willie Macleod: I live in part of the area that Ms Grahame represents, so I see at first hand the impact of Covid on rural tourism and hospitality. If I gave the impression that rural businesses were unaffected by the pandemic, that was not the intention. The data will show that city businesses have been most seriously affected due to the loss of markets—not only tourism, but the normal leisure activity that takes place, as well as business activity. That impact has extended to rural business as well. Two of the hotels
that Ms Grahame mentioned, which are not five miles from me, are unable to open or are only partially open, and other hotels that would normally open all year have decided to close until sometime in the spring. That has a massive impact on the supply chain. We buy food and beverage items from wholesalers, but we use local tradespeople. Indeed, there is not a hotel, restaurant or pub in the country that does not have a tradesman in, each day of the week, to sort something that is broken, and taxis and other businesses rely on our customers to a great extent. The supply chain—through food and beverage, laundry and local tradespeople—has been affected, whether suppliers deal with rural or city businesses.
With regard to the available financial support, you could wind me up and on I would go. Although the UK Government and the Scottish Government have made significant sums available, the financial support quite frankly does not really begin to meet the costs that businesses are bearing. There is an employment issue. I might come back later to Bryan Simpson’s remarks on the matter, if time permits.
We saw the introduction of a series of financial support instruments, which started from the rateable value-related grants that were available in the spring. Businesses with a rateable value above £51,000 received nothing at that time—a major omission for larger businesses. We then went through various grant support mechanisms to support businesses during different periods of lockdown and different levels of restriction, but many of those grant payments did not go anywhere near meeting the fixed costs of closure. We did some work earlier in the year that suggested that the average fixed cost of closing a hotel runs at more than £60,000 a month—nearly £750,000 a year. The grant schemes that have been made available do not compensate for any of that.
The Scottish Government put in place a number of discretionary support schemes—the hardship fund, the pivotal enterprise fund and the hotel support scheme. The fact that those schemes are discretionary means that there are winners and losers. Not everybody wins from those; indeed, we have had an awful lot of losers We needed to consider a much more comprehensive, appropriate and on-going support scheme that would have helped businesses to meet the fixed costs of closure. Being closed costs money. Even having staff on furlough costs money. How on Earth does one meet those costs with
no income? Businesses are getting close the edge. We are losing businesses and, tragically, staff by the day. Christine Grahame: I really wanted you to focus on rurality. I appreciate everything that you have said; we are all aware of the dreadful impact to hospitality throughout the crisis. I take it that you disagree with me, and with some research that says that, in fact, the impact on rural areas can be more penetrating than it is in urban areas. I say that as a matter of fact—I do not want a war between urban
and rural areas. In passing, on your comment about discretionary funding, local authorities—correct me if I am wrong—often administer that funding on the basis that they have a good idea of which businesses they need to support on their own patch. Do you think that they have done their job properly? Willie Macleod: I will focus on rurality. I am not trying to create a division between urban and rural areas in any way. The impact is certainly felt in rural areas as well, as I hope that I outlined in part of my answer. Rural businesses
are suffering just as much as city businesses, but the effect is more enduring in cities, which did not experience the pick-up in business after the end of the first lockdown and around the middle of July. Many rural businesses experienced a pick-up then, but it was, unfortunately, not prolonged enough. There is a cumulative effect on businesses that I would argue is being felt more in cities than in rural areas, but I am not in any way suggesting that rural businesses have not suffered during the Covid outbreak. Christine Grahame: Could you address the discretionary funding element that is provided by local authorities via the Scottish Government? In your experience, is that being properly used, because of the knowledge that local authorities have of their area? Willie Macleod: The funding is being provided by the Scottish Government, often with consequentials from the Treasury. We have had reports back of inconsistencies in the way that local authorities have administered central Government schemes. I have no first-hand knowledge of the way that local authorities have managed the schemes, although I have had reports back from our members. The point that I am making is that,
despite the significant sums that have been made available through Government, whether that is administered by local authorities or not, those amounts of money are inadequate—totally insufficient—to meet the costs that businesses are having to bear through enforced closure and restrictions on trading that are no fault of their own. Christine Grahame: I agree, but neither the UK Government nor the Scottish Government has a bottomless pit of money. I appreciate the issue, and that people are in that situation through no fault of their own. I am not unsympathetic but,
in the real world of the funding that is available in the pandemic—we may be back into lockdown after 27 December; who knows?—there has to be a limit. That may just be a comment. I want to the get to the issue of rurality. I accept what you say, Mr Macleod, but does anyone else have a different view? Stephen Montgomery: We need to segregate it; that is probably the better way because there are two sides to the issue. As Willie Macleod alluded, it does not matter whether it is UK Government or Scottish Government money, because the fact is that the money is not there to replace all lost turnover. All that the hospitality
trade in Scotland is looking for is to survive, and that money needs to be found somewhere, but it is not our job to go and bang the door in Westminster looking for the money—I do not want to get into that. On the point about the situations in cities and in rural areas, Mr Mundell will understand how bad we have it here in Dumfries and Galloway in rural south-west Scotland, as will Joan McAlpine, who I have spoken to. We are stuck and the reason that there is a drop-off in the hotel sector in Dumfries and Galloway is that we are caught between South Lanarkshire and Ayrshire, which are currently in tier 3, and Cumbria right the way across, which is in the English tier 2, which is between our tiers 2 and 3. So we do not get, and cannot get, visitors from those areas to stay with us, and the same goes for the Highlands and Islands region, which borders other areas that are in tier 3, so it does not get people coming across.
There is also the issue of workers not coming to Scotland because there is a fear factor, which is quite obvious. That trade has gone down a bit. I agree that rural areas have a hard time—as a business owner, I am finding that—but cities have been impacted because businesses are not coming into the city for meetings and staying over in hotels. Further, office workers are working from home, so they are not in the city and going to the local pub or whatever for a pint after work, and there are not the Christmas parties that we would normally have now. There is an equal share of negativity, if you like, in the trade. Cities have been hit hard but, equally, rural areas have been hit very hard. Money—just under £11 million--has been put into South of Scotland Enterprise, and I have seen the results of that. I said to Willie Macleod yesterday that I would not
have agreed on the distribution of that money to certain businesses, because a lot of hospitality businesses would have been more deserving compared with other industries and sectors that also got very little. Christine Grahame: I have no further questions. Bryan Simpson: I will come in quickly. I agree wholeheartedly
with Christine Grahame; rural communities and hospitality have been doubly affected. From our perspective, that can be seen most clearly in the effect on migrant workers. In places such as the Highlands, migrant workers have not only unnecessarily lost their jobs but have been evicted from their staff accommodation and, in some cases, have lost their pre-settled status. Those workers could not lose any more, and they are having to go back to their respective countries. I appreciate that there are financial concerns from the business perspective, but those employers could and should have furloughed those workers but have not. Not only are those
people losing their jobs, they are losing their staff accommodation and their right to remain. The Convener: A number of people want to come in, but perhaps they can do so in the next round of questions. Stewart Stevenson (Banffshire and Buchan Coast) (SNP): Like some other members of the committee, a great deal of my constituency is rural: 15 per cent of my constituents live in Moray, a level 1 area, and the other 85 per cent live in Aberdeenshire, which is a level 3 area. I will focus on the second-level effect, which is the effect that all that is having on some of the suppliers to the hospitality industry. In particular, I am thinking about the small suppliers. Very early in the crisis, we had the alarming statement from Tim Martin of JD Wetherspoon, who is worth more than £600 million, that he would stop paying his suppliers.
I am aware of small suppliers who were contacted to say that they would not be paid and were aghast. Is he the exception that I believe him to be, or does the issue of the second-level suppliers to the hospitality industry concern the Scottish hospitality group and UKHospitality? I ask Stephen Montgomery initially and then Willie Macleod. Stephen Montgomery: The supply chain has been secondarily hit, because it is a primary source for our businesses, particularly in rural areas, as you said.
As a business in Dumfries and Galloway, we use as many local suppliers as we can. Because we have been heavily hit as a business, that has a knock-on effect on the supply chain. That is not just in rural areas, it is also in cities; we cannot leave them out. However,
a lot of rural communities stick together and try to keep the money as local as we can. For anybody that says that they are pulling out and not paying their suppliers, it will go only one way. They will lose that business anyway, because the businesses that supported them will not support them in the future. Therefore, I encourage anybody who is buying
from a local supplier to pay them. We have to do that, because we need to support our local communities. We all need to get through this. Whether we are in rural or city areas, we all have the same sole aim of getting through the pandemic. The supply chain is absolutely key and it is another part of the sector that needs support. We all need support, but the
supply chain certainly needs support, because it is a pivotal part of our survival. Stewart Stevenson: It is also worth saying that the distinct, unique and special offer that the hospitality sector makes in local areas is often dependent on what it can source locally. After Willie Macleod answers, perhaps Bryan Simpson can make a brief comment on the effects. Willie Macleod: I will not attempt to speak for Tim Martin of JD Wetherspoon, because he is perfectly able to speak for himself. If he went ahead with his threat not to pay his suppliers, there will be have been consequences from them. As far as I am aware, there has been no major issue of suppliers going unpaid. As Stephen Montgomery referred to, if people do not pay their suppliers, the relationship will go only one way, and we are all dependent on each other, in order to get out of this situation and after we get out of it.
I am not naive enough to say that there may not have been instances where businesses came to an arrangement with suppliers whereby payment might have been spread over a period of time. We have fairly close working relationships with a number of suppliers who are affiliate members of our organisation and we work quite closely with the Scottish Wholesale Association. Indeed, we have supported measures to support those types of business. I am sure that Colin
Smith of the SWA would have been in touch with me if there was a major situation with suppliers going unpaid by the hospitality sector. Stewart Stevenson: I am just trying to get on the record that we are playing a team game here. I want to hear from Bryan Simpson, then perhaps briefly from David Weston, which will end my questioning, convener. Bryan Simpson: Your question is a good one. As a trade union,
we represent workers primarily, but we have been contacted by suppliers who are owed tens of thousands of pounds by large employers who have terminated their workers’ jobs—unnecessarily, we believe—when they have to make a small contribution. I am not saying that it is insignificant, but it is a small contribution. We have everyone from small one-person businesses to large wedding suppliers, fish suppliers and major hotel groups that are owed tens of thousands of pounds. We are therefore not just talking about the knock-on effect on workers; there is a knock-on effect on suppliers, who ultimately are also workers.
Just to support Willie Macleod’s point, I cannot speak for Tim Martin and I am certainly not going to try to, but he is a guy who, when the Covid pandemic first hit, refused to furlough his 40,000 workers but encouraged them to go and work for Tesco, which was lovely for them. I am therefore certainly not going to speak on behalf of Tim Martin, who is a rogue employer, even according to UKHospitality. Stewart Stevenson: Thank you. I am sure that David Weston and his organisation’s membership equally rely on many small, local suppliers.
David Weston: That is right. Bed-and-breakfast businesses and guesthouses will have small, local suppliers who will be of a similar size to, or bigger than, them. The situation therefore does not arise for them as it does for bigger groups that perhaps negotiate, do not pay or extend payment periods. B and Bs are paying their suppliers, but a 60 per cent drop in turnover means 60 per cent less business that those tiny, local suppliers of food, drink and other things are getting. That trickle-down effect will happen throughout the economy.
The Convener: I see from our chat box that Stephen Montgomery is also saying that rural hospitality relies on local suppliers with whom they usually have a close working relationship. I am sure that Stephen will be able to get back into the discussion later. Oliver Mundell will ask the next questions.
Oliver Mundell (Dumfriesshire) (Con): The witnesses have made some interesting comments so far. First, I want to hear more from Willie Macleod about the Biggar Economics study on hospitality that has come out in the past few days and on which I believe he has commented already. My understanding is that it has shown that a few small changes to the restrictions that are in place could potentially save thousands of jobs. Is that correct?
Willie Macleod: [Inaudible.]—so I have not seen the full report, but I—[Inaudible.]—with Biggar Economics in the early stages of its research. The report clearly shows that, if we took a more tailored, nuanced approach to closures and restrictions, we would find ways in which businesses could operate on a more viable basis. There is a clear distinction to be made between two elements. With the compulsory closure
of a business, it knows where it stands. However, when a raft of different regulations and restrictions come into play—whether they apply to trading hours or to the capacity of the business—we can quickly find ourselves in a situation in which the impact of regulation really puts—[Inaudible.]—business, and a business that is technically and legally able to open might be better off closing. The costs of operating in a severely restricted way erode any potential for viability, as we are seeing with businesses that are moving from level 4 to level 3. There is little difference
between levels 3 and 4 for a hospitality business. The ability to trade—and to trade viably—at level 3 is seriously compromised. The Biggar Economics report shows that, if we were able to fine tune and nuance some of the restrictions, we would find ways to enable businesses to operate more sustainably during the pandemic. Oliver Mundell: Nine months in—which feels like almost a year already—we have not been able to find the solutions and work with the sectors that are affected. Does Stephen Montgomery have anything to say on that? For transparency, I should say that I am aware that the Scottish hospitality group has been engaging with the Scottish Government, asking for slight tweaks and changes to be made. Has there been any progress on that? What has the engagement been like? Stephen Montgomery: I will break it down. The Scottish hospitality
group, at Fergus Ewing’s request, submitted a proposal on 3 March. In addition, along with the other trade bodies—as Willie Macleod will be aware—we submitted proposals in October, and we started campaigning with a call to “Tweak the tiers”. As an operator and a trade body, we felt that a 6 o’clock close was financially unviable for us. It
effectively closed many businesses that should have been able to stay open but for which it just was not viable to open. Under the levels system, they were able to open under the guidance, but it was not viable for them to do so, so they just took the decision to close. On the 6 o’clock close, the two main parts of a restaurant’s trading are between 12 o’clock and half past 2, and then between 5 o’clock and half past 8 to 9 o’clock. Under level 3, even without alcohol sales, it would be possible to have only the lunchtime service. In level 2, it is a matter of trying to cram people in for an evening service between 6 o’clock and 8 o’clock. That brings two issues. It is a question of trying to get
what money we can, with everybody wanting to come out, but there is an added risk. Through our proposals, we have asked on numerous occasions for levels, 1, 2 and 3—certainly for levels 2 and 3—to allow opening until 10 o’clock, with some element of alcohol sales. We would want to discuss whether that would be just with soft drinks in level 3, although we would obviously prefer an element of alcohol. That would solve many problems. As the report said, it would enable an upturn in business finances and it would give businesses a better way of managing staff, because they could give them their hours. That would allow the businesses to take them off furlough, meaning
less of a burden to the UK Treasury’s furlough scheme. It would also give staff a better level of mental wellbeing, because they would be able to come back to work and be part of the rescue of the trade. A tweak of the tiers is a definite must ask, and I am happy to say that that will be examined in the next review, I think. I would encourage the Government to apply that straight away.
It is a serious matter, as the levels are just not working for the viability of any business in hospitality at the moment. Oliver Mundell: Thank you for that answer. I will also briefly ask about bed and breakfasts. I am certainly aware from constituents that some B and Bs are still struggling to get financial support, particularly in an area that was in level 2 but is now in level 1. Those B and Bs, in particular, are struggling to attract guests who are travelling for essential and other reasons, who are often choosing to stay in more formal hotel settings. Has the association noticed that? Do you consider
that there is enough support in place for small B and Bs, particularly those in which people have guests staying in their own homes? David Weston: No. As I said earlier, there has not been enough support for small B and Bs, which have often fallen between the different criteria of different support schemes. Sometimes, they tell us that it is ridiculous and that they would be better off in level 4 than in level 3, as they might get support. Some people have found that they have not qualified for any support because of various fairly arbitrary reasons such as—as I mentioned earlier—not having a business bank account or not being on the business rates system. From the B and B point of view, because of
the quirks of the tax system, for example, they have seen people with second homes who have, for tax reasons, registered on the business rates system, get automatic £10,000 grants. However, B and Bs feel that they are small businesses that have been drastically affected, and some of them have received no financial help at all to date. Support has very much been lacking. Oliver Mundell: Those are my questions finished, convener. The Convener: Thank you very much, Oliver. We now move to Kenneth Gibson.
Kenneth Gibson (Cunninghame North) (SNP): The briefing that we were provided with states that the pub sector has lost 21 per cent of its employment, the restaurant sector 28 per cent and hotels 31 per cent. Clearly, different parts of the hospitality sector have been impacted differently. We have already had a discussion about the impact on rural areas. Sections of the industry—such as music and entertainment venues, night clubs, and conference centres—have not been able to resume trading at all. I think that Mr Montgomery said earlier that some sectors deserve it more—“it” being Government assistance. How can and should that be reflected in the levels of Government support? We will start with Mr Montgomery.
Stephen Montgomery: You mentioned night clubs. I think that they have each just been given a £50,000-odd grant. They have had some on-going support, which has been gladly received. There had to be a U-turn, which we were glad to see, because there were different areas of support. The problem is in the level 1 scenario. There are late-night venues that have a licence
until maybe 2 o’clock in the morning and music venues that predominantly take their trade from 10 o’clock in the evening onwards. However, they are not able to trade in any of the levels. I have raised that issue before with people, who said that the owners should just flip their business to offer a bar service. That does not happen overnight—that takes marketing, money and everything else. There must to be targeted support for people in level 1 who are not able to trade. Cocktail bars and other such businesses are not able to trade either. Those people will
probably not see the light of day until the middle of next year. They must be brought into the fold for funding. How that funding is targeted and allocated is a discussion that the trade bodies would like to have with Government. I am sure that Willie Macleod would back me on that one. At the end of the day, all we want to do is survive and come out of this together. Everybody in the hospitality sector, whether it be bed and breakfasts or the licensed trade, is suffering, and everybody needs targeted support. We submitted a document—which I have sent to Joan McAlpine—that
shows in a matrix how we would do that through 50 per cent, 100 per cent and 150 per cent support. The document is just a guide—things will change in time as the virus changes, and we know that the environment is fast moving. Nonetheless, the trade bodies as a whole would like to be part of the overall discussion. Kenneth Gibson: I am trying to focus on the question of how we ensure that everyone gets a fair crack of the whip when it comes to funding. Before I bring in the other witnesses, I highlight the UKHospitality submission’s reference to the “continuing disquiet” among businesses in the sector that larger hospitality businesses were excluded from support because their rateable value was above the ceiling of £51,000. Since then, we have had the hotel recovery programme funding and various other funds. Nonetheless,
in your view, Mr Macleod, how can we ensure that the available resources are distributed much more fairly? Willie Macleod: I dropped out of the meeting for a moment or two—can you hear me now? Kenneth Gibson: Yes, I can hear you fine. Willie Macleod: Sorry—my screen was indicating that I had dropped out of the meeting. In recent days, we have discussed with Government the distribution of the most recently available funding. One of the issues that we have wrestled with—[Inaudible.]—equitable distribution
of the money that is currently available. I am pleased to say that a larger sum will be made available to the businesses that were last week described—by Kate Forbes, I think—as having “fallen through the cracks.” Among those are the larger businesses with a rateable value above £51,000, which were excluded from the grant scheme back in the spring. However, the sums that we are currently able to carve out work out at less than smaller businesses would have got by way of the grants of £25,000 back in the spring.
I hope that I did not give Christine Grahame any indication that I thought there was a money tree—I wish that there was. We understand—[Inaudible.]—on public money, whether it is coming from Westminster or from Holyrood, but all the way through we have made the point that businesses are struggling and need financial support if they are going to come out of this. In many cases, businesses may have had support through loans from the coronavirus business interruption loan scheme or the bounce back loan scheme, or from their banks. Throughout the pandemic, businesses, whether they are large or small, have seen their cash flow and profitability disappear. Their reserves have been eroded as stakeholders, shareholders and owners have injected money into the business, and their cash flow has been decimated or lost altogether. We are now seeing businesses engage in what I might call unproductive borrowing,
which they are using simply to underwrite their cash flow to try to sustain the business through the crisis. There may be no money tree in Government, but there is certainly no money tree within businesses. Kenneth Gibson: Mr Simpson talked about migrant workers and people in rural areas. In some communities, hospitality staff make up 50 per cent of the workforce. In Arran in my constituency, the Auchrannie resort, which is now an employee-owned
business, has 171 workers, or at least it did before the pandemic; it has now had to close until 29 January. What is Unite’s view on how we can better redistribute available resources at this time? Bryan Simpson: That is a good question. I cannot disagree with my colleagues’ argument that there has not been enough financial support for employers, but there has been no direct support for workers. It is true that, by and large,
that money is used for top-ups to furlough, but it is simply not enough. When we were consulting senior civil servants in the Scottish Government, we were always calling for extra financial support. We wanted some, if not all, of the £49 million that was put aside for hospitality in Scotland to go directly to the workers. We are not
saying that employers should not be supported by Government grants; we are pointing out that workers on the minimum wage are the worst affected financially by the crisis and they deserve direct support from the Government that is supposed to represent them, whether that be through a grant of £1,000, for example, or through a hardship fund from the Scottish Government that workers can access. Charities are having to set these things up. I am not saying that there is a magic money tree or that Westminster is not massively to blame for the lack of financial support that it provides to the Scottish Government, but that still does not reduce its liability for the fact that no direct financial support has been set up for workers other than through the third sector. It is upsetting that that has caused poverty for a lot of workers either who have not been furloughed or who have been furloughed and for whom 80 per cent of the minimum wage is just not enough. Kenneth Gibson: I fully understand your frustration, Mr Simpson. Obviously, as a devolved Parliament, we do not have powers over borrowing. We have restrictions
on how much we can spend, and there are various other issues that I do not necessarily want to go into. However, you have raised important points. The Scottish Government will argue that it has spent more on support than the Barnett consequentials, but the support for workers angle that you bring to the discussion is extremely valuable. Mr Weston, do you have any comments to make on what we have discussed so far, particularly on how we can provide more nuanced support? Some business are clearly gaining proportionately more than others. Everyone is experiencing loss, but we need a much fairer allocation of the available resources, regardless of the totality of those resources. I am interested in hearing your view on that.
David Weston: We are happy to liaise with the committee and any parts of Government that it would help for us to liaise with to make any individual piece of Government financial help fairer and go to the right places. It is good to be part of that dialogue. The one big point that I would like to make is that, if businesses are in danger of not surviving, financial support is necessary. However, instead of financial support, we would rather have proportionate restrictions. In other words, the restrictions should be such that they allow our businesses to continue as much as they can and allow financial viability. I am not talking about profits, just about financial viability.
My colleagues talked earlier about how it is important to look at the closing times for pubs, bars and restaurants. Another issue for our sector is whether the restrictions on serving alcohol and meals should apply to residents in bed and breakfasts and hotels, as opposed to people who are just coming in to the restaurant or bar. Should residents be as restricted? It is very important that the restrictions are looked at in the light of their medical necessity, because some of them that were not needed for medical purposes have had a disproportionately damaging effect on businesses.
Kenneth Gibson: Thank you for that. I realise that we are pressed for time at the moment, convener, and I would have loved to ask more questions, but we have to be in the chamber for an item of business that we did not know was going to happen when this meeting was arranged. I thank the witnesses for their responses. The Convener: Thank you, Kenneth. As Mr Gibson alluded, there is a vote in the chamber that we did not know about until this morning. It has been called rather late in the day. We are therefore going to finish now. I thank Mr Macleod, Mr Montgomery, Mr Weston and Mr Simpson for attending and giving evidence today. It was very helpful. I am aware that we have only scratched the surface, but we
have your written submissions with some of your detailed proposals and detailed solutions. Please be assured that we will take cognisance of them when the committee comes to its conclusions.