Furlough costing hospitality 'over half a billion a month'

By Joe Lutrario contact

- Last updated on GMT

How much does furlough cost the restaurant and pub industry?

Related tags: Furlough, Coronavirus, S4labour, Scottish Hospitality Group

Furlough is costing the UK Hospitality industry in excess of £542m a month during lockdown.

That’s according to a new analysis by online labour-scheduling management company S4labour, which puts the average extra employment costs per month per site over and above Government furlough support at £3,738.

While furlough has been a lifeline for both hospitality businesses and staff, the report argues that ‘it is not the free lunch it is sometimes portrayed as’. 

Operators making use of the scheme benefit from a grant that covers up to 80% of their employee’s average earnings

But the Catton Hospitality-owned S4labour says operators are left ‘constantly out of pocket’ by other costs including National Insurance contributions , the accruing of holiday and cashflow costs as a result of furlough being paid in arrears. 

Rob Pitcher, the chief executive of Revolution Bars and user of S4labour says that the scheme, while welcome, has cost his business £1m at a time it has seen revenue vanish.

“With the current levels of government support, businesses are going to run out of cash before they get the opportunity to reopen. The true cost of furlough is much higher than one might imagine,” says S4labour chief customer officer Sam Wignell. 

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. 

“It is complete madness that there’s a whole bureaucracy set up to move money around like this to no-one’s benefit,” says Scottish Hospitality Group Stephen Montgomery. “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.” 

Related topics: Business & Legislation

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