Despite Underbelly receiving more than £750,000 in government support through coronavirus support schemes, it is understood at least two suppliers are owed around £350,000 between them for the last major pre-Covid event run by the company.
The company says it has a plan in place to deal with the debt and that they are set to make a profit by the end of the financial year.
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At least £121,000 of this debt is owed to a Scottish supplier, with Underbelly’s latest accounts showing it owed £2.7 million to creditors as of March 2020, though that figure is understood to be significantly lower today with the company stating it is in a “strong financial position”.
The news comes a day after Underbelly announced its plans for a revamped Edinburgh’s Christmas festival this winter.
The pandemic has hit the live events industry particularly hard, with the Scottish Government approving a £10m rescue package for the country’s events sector and around £6.5m specifically to Edinburgh’s festivals.
The Scottish Tourism Alliance warned on Monday that next year’s entire tourism season was under threat due to the impending decision by the Scottish Government to retain Covid-19 testing requirements for incoming travellers.
Yesterday, Underbelly announced fresh plans for Edinburgh Christmas 2021 and has had a contract with Edinburgh City Council since 2017, with a new tender expected to be issued within the next months for the winter festivals from 2022/23 onwards.
Accounts filed by Underbelly for the 2019/20 financial year, ending in March 2020, show the company on a difficult footing due to the pandemic.
Around £870,000 was owed to the taxman through deferred payment of VAT, which was due to be paid in June this year, though the company confirmed around half of this has been paid and an agreement is in place with HMRC to pay the remaining balance by January.
Last year, the company also owed £71,000 more than it had in assets, putting the business at risk had creditors decide to call on their debts. However, the company has said it will return to a profit by 2022.
Underbelly’s venture into Asia is also putting a strain on the company, owing more than £423,000. Accounts state that it “does not have sufficient funds to repay this balance”.
Shows have restarted in the region with Underbelly’s production ‘La Clique’ due to open in Singapore later this month, with profits from that show key to repaying money owed by the company.
By Popular Demand Promotions Ltd, in which Underbelly is a majority shareholder and which acts as a holding company for directors Charlie Wood and Ed Bartlam, also owes £313,881 to the main Underbelly company.
The accounts also state Underbelly has accessed “significant funding” under the UK Government’s Coronavirus Business Interruption Loan scheme, as well as several “non-repayable grants” from government schemes.
Underbelly also said it received grants under the furlough scheme and that “directors and their families” loaned “significant amounts” in long-term loans to the company.
The entertainment company was also handed more than half a million in grant funding from Arts Council England, alongside a further £250,000 from the Scottish Government.
Responding, a spokesperson for Underbelly said the company was in a “very different financial position today”.
The spokesperson said: “As a business, there’s no doubt that the restrictions placed on the event industry over the last 18 months have been extremely challenging to navigate.
"During this time, we’ve taken advantage of the financial help that was made available to us. We’ve managed our cash flow and, thanks to the support of partners and suppliers, we are in a strong financial position to move forward.
"Underbelly has cleared its overdraft, taken out a CBIL loan and has repaid over half of its VAT due under the agreed Covid deferral scheme, with the balance due to be paid before January.
“Of the debts owed to suppliers in 2019, there is only £121,000 remaining in Scotland owing to one supplier.
“This supplier has been incredibly supportive of our position and has provided us with extended payment terms, which we are forecast to have paid off fully by the end of this year."
Commenting on the potential impact of additional Covid-19 restrictions on the winter festivals, the spokesperson said only one in five visitors to Edinburgh’s Christmas and one in four to Hogmanay were international.
The spokesperson said: “Our planning for Edinburgh’s Winter Festivals this year has taken into account the numerous restrictions that have been placed upon the event industry by the Scottish Government and we will continue to navigate that over the coming weeks. Despite this, we are confident we can still deliver an outstanding event for the city of Edinburgh whilst providing a safe environment for our visitors.
“Edinburgh’s Winter Festivals do not rely on international tourism to succeed. Only 19 per cent of visitors to Edinburgh’s Christmas and 26 per cent of visitors to Edinburgh’s Hogmanay are international and 65 per cent of visitors to Edinburgh’s Christmas are from Scotland.
“As was demonstrated this summer, we are confident Edinburgh will benefit from an increase in domestic visitors from throughout the UK to make up any shortfall.”