Joanna Millar
- Director
Insights | Commercial Property
Navigating the storm – Scotland’s licensed trade sector under pressure amidst ongoing challenges.
19 March 2024
Scotland’s licensed trade sector faces a multitude of challenges, with the recent UK budget adding to the complexity. As the sector grapples with changing consumer behaviours, regulatory pressures, and economic uncertainties, the budgetary measures introduced at the beginning of March 2024 underscore the need for resilience and adaptability. There were some overall positives which may assist the licensed trade by giving the public, for some, a little more in their pocket, but inevitably there were also challenges. For licensed premises, alcohol duty was due to rise by 3% from August but the Chancellor, Jeremy Hunt, announced as part of the budget measures that it will be frozen until February 2025, which the government believes will benefit 38,000 pubs across the UK. In addition, Mr Hunt says he plans to allow full expensing to apply to leased assets. Simply put, this allows businesses to offset investment in items such as new machinery and IT equipment against tax.
The introduction of the controversial Low Emission Zones (LEZ) has also been a challenge for city centre premises across Scotland as many potential customers can no longer bring vehicles into the city centre and so opt to go local, or not go out at all. The introduction of LEZ was not supported by initiatives for transport providers by Scottish government or councils, who say they are also cash poor and must stretch budgets across all areas. The result was a reduction in late night transport services rather than an increase and, while that seems to have levelled out somewhat, it is not resolved. The late-night economy across Scotland is in jeopardy and the trade reported a very quiet New Year in 2023 across many cities, impacting what is usually a very busy and therefore potentially profitable time of year. Operators have also had to increase prices to cover their own spiralling costs and the feedback we are getting from clients is that there is less footfall into premises and customers are buying less when they do go out.
It is clear both the UK and Scottish governments have a desire to get more people into the workplace and are trying to stimulate sector growth, and therefore improve employment. This only goes so far, and the licensed and hospitality sectors remain challenged by a lack of available staff, which Brexit and Covid undoubtably made worse. The sectors continue to struggle to attract, secure and retain employees in a career path which can mean anti-social hours and stressful environments. Employees in Scotland’s licensed trade report having to pay staff higher levels than ever before. In addition, new incentives across some council areas also see employers responsible for paying to ensure staff are able to get home safely. This is a benefit to employees and in some areas a necessity to ensure their safety, but the reality is it is another cost which has to be borne by already stretched operators.
The Scottish Licensed Trade Association (SLTA) carried out a survey over the festive period in 2023 asking for feedback on the concerns which Scotland’s pubs, bars and hospitality venues face as they go into 2024. Over 500 businesses responded, and among various concerns highlighted, the negative impacts of a declining economy and a continued rise in rates, labour and supplier costs were cited as concerns. As a result, 75% of respondents said they could not see their business still being operation at the end of 2024 without government support. Also, 22% of respondents said they saw more than a 10% decline in trading over 2023. Furthermore, 57% of operators who responded also said they would not be open full time in January and February 2024 as it was often costing them more then was coming in just to keep the doors open and lights on. This will have to be reviewed as the year wears on, but it is clear from these figures that many operators are concerned for their own future and that of the wider licensing and hospitality sector. These statistics are not only concerning but also evidence a sector under more pressure than ever before.
For more information, please get in contact with Joanna Millar or your usual Anderson Strathern contact.
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