Skye survey reveals jobs will go before government job retention scheme kicks in
80% of businesses with staff on furlough during the Coronavirus crisis do not have enough cash to pay wages for the next two months until the Government’s Job Retention Scheme is up and running and refunds are paid.
That is the stark warning from Tourism Management Organisation, SkyeConnect, following the second of a series of surveys on the economic impact of Coronavirus on island businesses. The survey was sent to almost 1000 businesses and individuals on the 26th of March with a 10% response rate.
SkyeConnect Chair, Dave Till, is calling for urgent action to speed up the implementation of the Job Retention Scheme.
“Industry welcomed the Government’s plan to pay 80% of staff wages during the crisis, but the picture that is emerging shows the vast majority of businesses will run out of cash and their staff will be laid off before payments reach employers. The Government needs to get this scheme in place quickly to ensure hard cash gets to businesses before it is too late. We are asking Government to appeal for recently retired civil servants to volunteer to return to HMRC to assist with getting the administrative processes in place as soon as possible.”
The weekly economic impact survey also revealed that one in ten businesses only have enough cash or projected income to survive for another week. A quarter have reserves to keep going for between two and four weeks, while almost half of businesses responding say they can survive for up to three months.
Unsurprisingly, 97% of businesses have, so far, received no financial support. The small number who have received some form of assistance have cited mortgage holidays or tax-credits.
Despite the intense cash-flow pressures, businesses are doing their best to provide support for their staff. Billy Harley, who owns the Uig Hotel on Skye, has put a number of staff on ‘furlough’ and is providing accommodation and food.
“They are all very, very, very sad to be walking out of here not knowing what they are doing. They don’t want to be off work. They are worried about what they are going to do. It’s the same for people all over the country. It’s the not knowing, I think, but that can’t be helped. We have 8 live-in staff at the moment. We are keeping all of them in our accommodation and obviously keeping the lights and heat on for them. So, they will be absolutely fine. I think it is the right thing to do. All of the live-in staff – we have Spanish, German, Scottish, Bulgarian and Polish. They all wanted to stay here. We did offer to contribute towards their return costs if they wanted to leave the UK but nobody took us up on that. So, we have just shared out our entire kitchen of food that we had got in for the next week or so and we’ve just had a market and let everybody take away what they wish…..anything left over will be sent up to the house for them to make soups and the like with……….. I wouldn’t like to say we would go under but there is only so long you can keep paying the bills to keep a property running.”
ONLINE TRAVEL AGENTS’ BEHAVIOUR PUTS ACCOMMODATION PROVIDERS AT RISK
On Friday (27th March), SkyeConnect issued a strong condemnation of the behaviour of Online Travel Agents (OTA’s) in automatically cancelling bookings and issuing refunds regardless of any arrangement’s accommodation providers have made with individual customers.
In the survey, it was revealed that on average Skye accommodation providers receive 50% of their bookings through OTA’s. In the last week, 20% of respondents with cancelled bookings report receiving a refund on the commission they paid to their OTA’s. However, almost one in ten say their OTA is refusing to return Commission on bookings which have now been cancelled and fully refunded.
SkyeConnect Chair, Dave Till is appalled.
“We constantly hear the phrase ‘we are all in this together’, but that is certainly NOT the case where the Online Travel Agents are concerned. They are not operating in partnership with accommodation providers. They are profiteering at the expense of SME’s who were already facing a cash-flow crisis. I fully expect to start hearing of business failures any day now. It is a disgrace.”
In one case reported to SkyeConnect, a Self-catering operator had a lot of bookings for April and May on ‘non-refundable deposit’ terms. In good faith, the operator contacted each and every customer to offer credit notes to enable the booking to be honoured at a later date. The vast majority of customers – understanding the cashflow crisis facing the sector – agreed to accept credit notes and leave their deposits in place. But, without warning, Booking.com stepped in.
“…..and then this morning (25th March) I woke up and there were cancellations free of charge……….and so, guests have agreed credit notes which meant we thought we had that funds (sic) to tide us through……. And then Booking.com sent out mass emails to everyone with a check-in date up to the 13th April and said you can now cancel Free of Charge………….and of course Booking.com are still taking a fee.”
Another Skye Business offering Bed and Breakfast accommodation claims the crisis and the behaviour of the OTA’s has had a devastating effect on the business and their family.
“We just went from being financially stable to being on the breadline within a week. At the moment I have a small income but that doesn’t cover anywhere near our outgoings. So, we have got our mortgage holiday and we are putting all our food on to credit cards at the moment, but we only have a certain amount of credit. We reckon three months and then we are going to run out of credit avenues.”
SkyeConnect’s, Dave Till, is urging Government to step in and prevent further distress in the sector.
“Small Businesses are powerless against these global giants. It needs Governments to bring the OTAs into line and prevent thousands of small family businesses, as well as larger hotels, from running out of cash and going bust. SkyeConnect is working with VisitScotland, other industry-bodies, the Chamber of Commerce network and other business organisations to press the case for urgent action.”
ARTS AND CRAFTS SECTOR FACING FINANCIAL HARDSHIP
20% of Skye’s Arts and Crafts businesses have less than a week of cash reserves. This is one of the findings of a supplementary economic impact survey conducted by SkyeConnect this week.
Twenty-eight businesses responded to the survey with a third reporting that they do not have an online sales channel and therefore will have no income during the economic ‘lockdown’.
A growing area of concern for Arts and Crafts providers, as well as many others referring to themselves as self-employed, is the apparent lack of Government support for people who have a particular tax arrangement. Many are paid as employees of the Limited companies they are also Owner/Directors of. To be tax efficient, they pay themselves a very small salary and take the majority of their ‘wages’ in dividends. So far this class of self-employed person falls through the cracks of all the Government support schemes announced to data.
Stuart Whatley has run Edinbane Pottery for the last 48 years. Stuart and his wife Julie are employees of the company along with one other full-time and one-part-time employee. 95% of business sales are through their shop which is now closed indefinitely.
“We have been going long enough to have built up a reserve. In cash terms we are probably OK for three months……….. I am over the retirement age so don’t pay NI. So, I take a small wage but most of the money I take out is in the form of dividend and Julie – my wife – is paid a National insurance wage and also takes out most of her money in dividends. We’re employed by a Limited Company, Edinbane Pottery, so we are actually employees. This is a pretty common thing for small businesses, and I have heard no mention (of support) so far……… There needs to be a change if it is going to be equitable for the self-employed and for people in our position who are employed but take a dividend.”
Other Craft businesses are concerned that their employees will not be eligible for support under the Job Retention Scheme. In the SkyeConnect survey, 80% of Arts and Crafts businesses that responded, said that not all their employees were ‘on the books’ in February. It is widely reported that the Government is going to use PAYE returns for February as the criteria for refunding companies for up to 80% of wages paid to ‘furloughed’ staff.
SkyeConnect is continuing to campaign on this issue and many more.
SKYECONNECT IS WORKING ON MANY FRONTS TO ENSURE SKYE BUSINESSES GET THE SUPPORT THEY NEED
SkyeConnect is lobbying and communicating on a range of key issues affecting Skye businesses. They include:
- OTA’s and the treatment of ‘partners’
- Job Retention Scheme – timing of payments and criteria
- Business Grant schemes – timing of payments
- Banks and Loan criteria
- Assistance for ALL self-employed not just Sole Traders
- Scotland’s Self-caterers to be treated the same as their English counterparts (currently required to demonstrate this is the main source of income to receive support)
- Strategy for recovery
If you have an issue you think SkyeConnect should be tackling or a story you think needs to be heard, email simon@skye-connect.com
There will be another Survey sent out to 1000 businesses and individuals in the middle of next week.
