NI hospitality businesses burning through £1m a day during lockdown

Hospitality businesses are incurring significant costs despite considerable government support, a leading business analyst has said. Picture by Hugh Russell
Hospitality businesses are incurring significant costs despite considerable government support, a leading business analyst has said. Picture by Hugh Russell

THE north’s hospitality industry is burning through around £1 million a day to stay closed in lockdown, a leading business analyst has said.

Brian Murphy of BDO in Belfast said his research found that despite considerable support from the government, businesses are still covering around 50 per cent of costs out of their own pockets and bank lending.

The comments came as the Northern Ireland Chamber and BDO NI presented the results of their latest quarterly economic survey.

The report reflected further signs of economic recovery in the first three months of 2021, but like Ulster Bank’s latest purchasing managers index, it found significant price pressures mounting on businesses here.

The survey also found one-in-three firms are still experiencing very challenging trading conditions.

Around 15 per cent of the 210 businesses surveyed reported no signs of improvement at all in Q1.

Brian Murphy said those problems will begin to crystallise in the coming months.

He said financial support will need to continue to prevent a surge in company failures.

“We do need to be mindful that there have been restrictions across the board on taking actions for insolvencies.

“There are actions pending in relation to business failures and what I am hoping for is that there is a pot of money there that will go some way to addressing those issues and hopefully avoid any major restructuring.”

Mr Murphy suggested that informal interventions or even company voluntary arrangements could avoid more terminal outcomes for businesses.

Overall, the survey did reflect some encouraging signs within the economy, with confidence around turnover and profitability improving for both manufacturing and service sectors.

And although 41 per cent of businesses reported difficulties in adapting to new trading arrangements following the end of the Brexit transition period, 68 per cent believe Northern Ireland’s status now presents opportunities for the region.

But those new trade arrangements appear to be a factor in cost inflation. Some 92 per cent of manufacturers are experiencing pressures from rising raw materials costs, resulting in expectations to raise prices in the next three months.

Chief executive of NI Chamber, Anne McGregor said: “Hikes in the price of raw materials are a significant factor, but we also know that there are multiple other escalating costs contributing, including higher logistics costs and significant additional costs associated with trading during Covid-19.

“Over the course of the next quarter, we can expect to see a sizable portion of these price rises passed on to the consumer, as firms simply cannot afford to absorb them.

“The survey does show that some of the lost ground experienced in the economy since the start of the pandemic has been recovered and confidence is starting to return, particularly in manufacturing.

“However, we must temper this with the reality that large parts of the economy are still shut down, there remains significant spare capacity and many key balances remain negative, meaning that there are still more businesses in Northern Ireland reporting falls in domestic and export sales/orders, cashflow and investment than those reporting an increase.”