Scottish Government urged to step up support for tourism and hospitality as research shows one in three businesses at risk of failure

Marc Crothall

Unless the Scottish Government steps up and helps tourism and hospitality businesses further, one in three of all businesses in the sector could fail this year, according to new research by the Scottish Tourism Alliance (STA). Within the Food and Drink category, which includes bars and restaurants, this rises to almost half of all businesses,

Additional grant support and VAT being retained at 12.5% are the two main changes that would help the sector as well as a robust marketing campaign to stimulate the international market suggested the respondents.

The survey of 1,335 businesses in the tourism and hospitality sector in Scotland, took place between 17th December and 10th January and it shows the impact of the pandemic on Scotland’s hospitality sector.

The research revealed almost 85% of food and drink business in Scotland (including restaurants, bars and cafes) are in financial difficulty and 78% of Serviced Accommodation businesses also say they are in financial difficulty- this includes hotels, guest houses, hostels and B&Bs.

Three-quarters (76%) of food and drink businesses have 2 months or less cash reserves and almost half (46%) say that they are likely to fail.  Serviced accommodation business are less pessimistic but at 60% the numbers saying they have no more than 2 months of cash reserves is high.

These business say that the need additional grant support and that VAT being retained at 12.5% are the two main changes that would help them – followed by the removing of COVID restrictions.

Commenting on the survey results, STA Chief Executive, Marc Crothall said, “The strength in the number of responses to the survey shows just how anxious tourism businesses are to communicate the level of deep financial pain and commercial instability they’re experiencing as a result of the recent measures introduced and of course the dip in consumer confidence in line with public health messaging.

“Emergency financial support from the Scottish Government has been hugely welcomed by the sector, including the recent announcement of a further £9M for the sector to be assigned to coach businesses, day and tour operators, hostels, inbound tour operators, outdoor and marine activity operators and visitor attractions. However, for the vast majority of businesses, this won’t touch the sides of what is evidently a gaping chasm between business failure and any sense of stability.

“What our survey highlights is a much greater opportunity and the need for governments to leverage supportive policy around areas such as business rates, the retention of the current rate of VAT beyond March and remove potential barriers which are recognised as being significantly detrimental to business survival and recovery.  We need to see a commitment to supporting a robust marketing campaign to stimulate the international market which our visitor economy, particularly city destinations are so reliant on.

“The window of opportunity from an international perspective will close in March; the next few weeks are therefore critical for securing international bookings and the hope of a relatively buoyant summer season.  Positive messaging in relation to safety around travel to and within Scotland will also be essential to restore public confidence.

“All businesses across every part of the sector in Scotland are experiencing a rapid increase in costs combined with significant financial losses; there has never been a greater need for the sector to trade unencumbered, without additional costs since financial support will never fully restore businesses to a more even keel in terms of viability and the ability to remain competitive.”

You can read the report here

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