Jackie Fraser blog – how Scotland’s tourism sector can reopen after lock down

Tourism is one of Scotland’s most important and fast growing sectors contributing over £11bn to the nation’s annual GDP. Last year it employed around 218,000 people accounting for more than eight per cent of total Scottish employment. In 2018 total overnight tourism trips in Scotland reached 15.5 million, a rise of three per cent from the previous year. At a time when stay at home holidays are increasing, partly due to pandemic-related foreign travel restrictions, it’s worth noting that UK residents already account for 12 million of those trips.

After the traumatic impact of the Covid-19 lockdown, the sector is now eagerly awaiting the opportunity to reopen for business on 15 July. While social distancing measures will put a limit on the scale of reopening, those who run tourism businesses are hoping it will enable them to generate at least some revenue, which could make the difference between survival and closure.

Many tourism businesses in Scotland and across the UK have seen a raft of support and assistance offered to them as a result of the effects of the pandemic. As 15 July approaches, they must now consider how their cash flow has been impacted, and is likely to be further affected by recent financial highs and lows.

They will need to determine whether they have suitable short-term cash reserves to pay employees and suppliers after the financial drain incurred since March, or whether borrowing is required. If this is the case, businesses must then decide if they are comfortable with the level of debt burden incurred and the impact this will have going forward.

The UK Government VAT deferral scheme, which enabled businesses to postpone three months of VAT payments to 30 June, has provided some help with cash flow. Those businesses which grasped this opportunity by cancelling their VAT direct debit for that period will now need to reinstate this or could risk running into VAT arrears going forward.

The industry is also set to benefit if the strong rumours of a reduction in VAT come to fruition. While not yet confirmed, there have been reports the Chancellor is considering reducing the standard rate from 20 to 17.5 or possibly 15 per cent later this summer which would be a welcome development in improving cash flow for businesses within the sector.

Tourism businesses provide a lot of jobs and many will need to consider employment issues in advance of the 15 July reopening. This includes determining when existing employees should be taken off furlough, or when new people need to be hired. Another important issue for tourism businesses is how they will ensure they are able to safeguard their employees’ health and follow new government health and safety guidelines.

The tourism sector also provides a living for a significant number of self-employed people, some of whom will not be able to return to work in mid-July. There is, however, support in place for these workers as the UK Government recently announced the extension of the Self-Employment Income Support Scheme (SEISS). Qualifying individuals can continue to apply for the first SEISS grant until 13 July and claim a taxable grant worth 80 per cent of their average monthly trading profits. This is paid out in a single instalment covering three month’s profits capped at £7,500 in total. Applications for a second grant will open in August, with qualifying individuals able to claim a further grant worth 70 per cent of their average monthly trading profits capped at £6,570 in total.

These government schemes have been essential in supporting the businesses and people driving the economic success of Scottish tourism. While this will be a hugely challenging year for many, the 15 July reopening of the sector is hugely welcomed and anticipated. It is essential that businesses are suitably prepared to make the most of this year’s limited trading window so they can survive the financial blow of the pandemic and build for the future.

When cash is running out, who will help the regulators to regulate?

In our day to day lives, most people make the assumption that various regulatory bodies exist to help protect our best wishes and therefore their presence is essential. OFGEM regulates the gas and electricity industry, FCA regulates the financial industry and Food Standards Agency protects public health in relation to food (a full list can be found here). But what happens when the regulators find themselves running out of funds to do the very work we want, to protect us?

This is the interesting position currently faced by the Office of the Scottish Charity Regulator (OSCR), that is reported to be looking at ways to cover rising costs, in a time of lowering Government funding.

Could Scottish charities be motivated to contribute something towards OSCR’s running costs e.g. pay a fee to register or subscription to a range of services? Or could this present a barrier that prevents charities from acting in an ethical manner that will undermine public trust in the charity sector through misappropriation of funds or other scandals? It’s a very difficult question and one that many regulatory bodies will also surely face in the coming months or years.

At a time when the third sector itself is coming under greater scrutiny after recent high-profile scandals, asking charities or the public to help pay for the administration costs of a government-created body is a challenging request and one to which there may not be an easy answer.

Regulatory bodies exist to protect the public, but without extra funding we may find ourselves without their expertise and safeguarding. This is a position that surely no one wants.