From sea to plate: How COVID and Brexit have impacted hospitality
When Roy Brett, chef and partner at Edinburgh’s Ondine Restaurant answers his phone to Holyrood, he is at the fishmarket. It’s just after nine on a Monday morning, and like all other restaurateurs across Scotland, Brett is unable to open his doors to customers.
But here he is, seeking out fresh produce for any orders he picks up through his ‘at home’ service.
The past year has been a tough one for Brett, and all those who make up the hospitality sector: from the restaurants, hotels and pubs, right the way through the chain to the suppliers, distributors, farmers and fishermen.
The food and drink industry is one of the largest sectors in Scotland, worth in the region of £15bn and employing some 120,000 people in communities across the country. It has also been one of the areas hardest hit by the coronavirus pandemic, with industry forecasts predicting up to £3bn in revenue lost in 2020 alone.
While the hospitality sector was officially ordered to shut down on March 20 last year, Brett says he felt the impact several months beforehand as tourism slowed and uncertainty around Brexit loomed.
Business meetings and client entertaining had stopped, and the number of Chinese customers – who would normally make up about 50 per cent of the seafood restaurant’s trade – slowed down and then stopped.
“Then we just started to watch from January, February and then it was just waiting for announcements from Boris Johnson to find out where we were,” recalls Brett.
What happened next, of course, was months of disruption and financial uncertainty for the sector, as hospitality went in and out of various restrictions.
After re-opening in mid-July, many businesses benefitted from a surge in trade in August with the Eat Out to Help Out Scheme, but the disruption continued when they were closed temporarily in central Scotland in October. This was followed by the restraints of the five-tier system, introduced in November, and later the closure across most of Scotland from Boxing Day.
“For me, the impact on the sector won’t be fully realised for a while,” Lucy Husband, market development and business engagement director at Scotland Food and Drink tells Holyrood.
“We’re working through lots of new conditions and we’ve gone into another phase of lockdown.
“I think social distancing will be with us for some time to come. There’s a number of things you see at the moment, the economic part of it, the psychological impact on people and on the businesses, and the personal side, it’s going to have a deep and long-term impact on the sector.”
She adds that there have, however, been some positives within a sector that has always shown great resilience.
“There’s been many businesses out there who have been very entrepreneurial, very resilient. The circumstances that everyone is working in are absolutely tragic, really hard, unforgiving, but businesses have pivoted and adapted.”
Case study: 'We've lost £70,000-80,000 of revenue and we don't know if that's going to come back'
Brett is one of many chefs to have launched a ‘dine at home’ service: restaurant-quality meals, ready to heat and eat.
During the first lockdown, Brett started doing ‘Ondine at Home’ at weekends, then during summer when lockdown restrictions were eased, he saw a “flicker of hope” and managed to open a maximum of four days a week.
But the restrictions imposed on hospitality within the central belt in October – when restaurants were allowed to open from 6am to 6pm but without alcohol sales – hit the business hard.
“Nobody comes to a restaurant at six in the morning for fruits of the sea or lobster thermidor or scallops, so basically we were only able to open 12 to six, but really you could only open until five because you had to get people out by six.
“It would have been better just to close us because we were open, we brought staff back in but we just lost money through that whole period.
“We were talking about 80 per cent down each day on what we would normally do. It was a really trying time. And then we got closed down again.
“Three closures later, we’ve tried to do what we can. We are just trying to keep the business going.”
Brett has had to make sacrifices, like many others in the sector, and as the October deadline for the end of furlough loomed – before an extension to the scheme until April was subsequently announced – he had to make some difficult decisions.
He has gone from 32 staff pre-COVID down to 12, with most of those furloughed.
“It was people that I spend every day of my life with and I’m telling them that, you know, the best thing to do for you now is to seek out employment elsewhere. It was very tough,” Brett says.
But in making these decisions and adapting his operation, Brett has ensured he still has a business to run; others have not been as lucky.
While there are no official figures available on how many businesses within the food and drink sector have folded, there is evidence to show how many have experienced significant financial difficulties.
“It’s a difficult number to quantify,” explains Husband. “Businesses have been open and then they’ve been closed, then they’ve potentially been open again and then closed again. Actually, trying to quantify how many businesses have permanently closed is really complicated.
“What we do know is that almost twice as many businesses in Scotland were experiencing what they call critical distress. That refers to businesses that have had winding up petitions or decrees totalling more than £5,000 against them.”
In the tourism sector, an industry that works closely with food and drink, the picture is similar.
The Scottish Tourism Emergency Response Group conducted a survey on the impact of COVID-19, where businesses were asked how much revenue they had lost so far due to the pandemic.
More than half of all businesses responding (58 per cent) claimed to have lost up to £50,000, with more than six per cent of respondents claiming to have lost more than £1m.
Of those businesses employing staff, 76 per cent of respondents have reported a reduction in staff numbers and 35 per cent stated they have made redundancies, with 69 per cent putting staff on furlough. Almost two thirds stated that they didn’t employ staff that they normally would.
Hospitality is a food chain, and it goes right out to sea, it goes right out to the farmers on the land, it goes to the telesales girls and guys who are answering the phone at night for your orders, it goes to the van driver, the guys who make the pots, the people who make the kitchen uniforms and tablecloths. It’s not just us, hospitality has so many arms and legs.
“We’ve not had the right financial support, insurers don’t want to pay out what they should pay out, there’s always a legal loophole there or some clause,” Brett tells Holyrood.
“In terms of hospitality, and I can only speak for my industry, it’s not just support for restaurants, it’s support for fishermen, for farmers who can’t kill their cattle, fishermen are now not going out to fish, because of the Brexit shambles.
“Hospitality is a food chain, and it goes right out to sea, it goes right out to the farmers on the land, it goes to the telesales girls and guys who are answering the phone at night for your orders, it goes to the van driver, the guys who make the pots, the people who make the kitchen uniforms and tablecloths. It’s not just us, hospitality has so many arms and legs.”
Case study: 'When you spend 20 years of your life building a business, to see it disappearing overnight is heartbreaking'
Figures released in January showed more than £55m in coronavirus support had been paid out to businesses between October and December through Scottish Government funding.
A total of 13,462 grants, worth £31.4m were processed through the Strategic Framework Business Fund, between 2 November and 28 December.
The COVID-19 Restrictions Fund paid out £16.7m from 9 October to 2 November. And between March and the beginning of October, the Scottish Government allocated 383,000 business support awards, totaling £2.3bn.
In December a £5m fund was announced for food and drink wholesalers, which targeted those who sell to hospitality, on-trade or public sector clients and had seen sales fall by at least 20 per cent since March. The support was intended to cover the shortfall in revenue and fixed operating costs, such as business rates and rent, as well as specific costs such as loss of stock.
This was followed by a £104.3m package of support for tourism and hospitality businesses.
“It’s been a particularly bruising year for our tourism and hospitality sectors,” tourism secretary Fergus Ewing said. “The COVID-19 crisis has shattered previously successful businesses and we are committed to doing everything possible to get them back on their feet. These funding streams seek to throw a lifeline to some sectors that we know are particularly vulnerable and may not have access to help from other sources.”
Husband thinks the figure of £3bn in lost revenue for the industry in 2020 is probably on the “low side”, particularly when you throw Brexit into the mix.
“£3bn is a good calculation at that point but it’s difficult now because you’ve got the compound of all the issues that are being well reported now with Brexit and trying to dissect Brexit from COVID is quite complicated,” she says. “It’s probably going to be more difficult to do a true calculation now but at the time it felt like a fairly rounded number.
“I suppose if you take an example, we talk about seafood every day at the moment and we have since the turn of the year, with the Brexit implications there, and they’re reporting to be losing more than £1m in sales a day. The complications of Brexit on top of COVID makes the calculation quite complicated.”
James Withers, the chief executive of Scotland Food and Drink, urged the Prime Minister to understand “just how fragile” the sector was with Brexit on the horizon.
Days before the UK struck a deal with the EU, he said: “Even if there is a last-minute deal with the EU, we cannot repeat strongly enough that food businesses, hauliers and border inspection systems are not ready for January 1.”
The COVID-19 crisis has shattered previously successful businesses and we are committed to doing everything possible to get them back on their feet.
Earlier in December, this sentiment was echoed in a member poll by Withers’ trade body. It said that nearly three quarters of Scotland’s food and drink industry (72 per cent) felt unprepared for Brexit and any resulting disruption.
The EU is the destination for 70 per cent of Scotland’s food exports and the largest market for Scotch whisky. Additionally, a survey of Scotland Food and Drink’s members showed that 64 per cent of its businesses think that growing sales in export markets in the coming years will be a challenge.
The key issues facing exports have been outlined by Scotland Food and Drink in its weekly updates. The latest of which was highlighted as groupage on Friday, 15 January. Full loads of a single product from a single company are managing to navigate the multiple steps to reach France, albeit slower and encountering issues. A major problem has been Scottish exporters who rely on groupage, which is the consolidation of multiple products from multiple companies into a single load. Groupage has been halted by many haulage firms.
The Brexit-related problems range from failing IT systems in UK and France to missing commodity codes and, as Scotland Food and Drink said, “a debate about whether official stamps on export documentation should be red or blue ink.”
One sector which has felt the pinch of these issues has been Scottish seafood. The industry has been plunged into crisis as lorry-loads of live seafood have been rejected because they have taken too long to make it to their destination.
The extra paperwork, export certificates and COVID tests for drivers – a requirement after France temporarily closed its border with the UK over concerns surrounding the new virus strain – have added hundreds of pounds in costs to every shipment, companies have said.
Despite all these difficulties, Brett believes the sector will be ready to get back to doing what it does best as soon as it is able to.
“I’m not sitting here feeling sorry for myself, or for my restaurant,” he tells Holyrood. “I feel that hospitality has had it very hard and the knock-on effect is massive.”
“But I also believe that hospitality, with all its arms and legs, would be ready, with government support, to re-open its doors at the first opportunity to get the economy back on track, and to support the economy of Scotland. We want to be part of that contribution.”