Coronavirus

Hospitality industry’s furlough costs nears £550m a month

Additional monthly employment costs reportedly sit at an average of £3,738

Furlough’s continuation is costing the hospitality industry £542m every month, according to the labour management service S4labour.

While the scheme has provided a lifeline for businesses within the sector and beyond, it reportedly continues to rack up bills for firms through national insurance contributions, holiday pay, and pension costs.

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Despite furlough covering 80% of employees wages, the research found that it is costing employers an average of £3,738 a month via additional employment payments.

Rob Pitcher, chief executive at Revolution Bars, confirmed that although welcome support, the scheme has cost the city centre bar chain over £1m throughout lockdown, contributing to its £32m loss for the year ended 27 June 2020.

Adding to employment costs, firms also face fixed costs such as rent, utilities, and insurance payments that are not wholly offset by government funding initiatives.

Moreover, variable costs in the form of cash flow difficulties that stem from furlough’s in arrears payment nature have also tightened businesses’ cash reserves in the sector.

Sam Wignell, chief customer officer at S4labour, said: “The true cost of furlough is much higher than one might imagine.

“With the current levels of government support, businesses are going to run out of cash before they get the opportunity to reopen.”

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