Second wave ‘could wipe out half of hotels and restaurants’
●Fresh lockdown would risk 90,000 Scottish hospitality jobs, say academics
Almost half of Scotland’s hospitality companies and 90,000 jobs could be at risk if the country is hit by a second prolonged lockdown, a new study by the University of Edinburgh has predicted.
The study, carried out by academics at the university’s business school, said that, if the recession following the Covid-19 pandemic is of similar severity to the 2008 recession, one in four businesses will fold and around 60,000 jobs will be at risk.
However, the research found small businesses would be least badly affected, with medium and large businesses likely to feel the worst of any economic slump or renewed lockdown.
Researchers, working with Wiser-funding, a London-based financial technology specialist, looked at financial statements of 5,000 Scottish companies in the tourism and hospitality sectors and examined their profitability and levels of debts.
To predict how the sector would be affected ,20 years of financial accounts were considered along - side previous crises such as the 2008 recession, the swine flu epidemic in 2009 and the debt crisis in Europe between 2009 and 2011.
Simulating different levels of “stress” on the sector, the models predicted a “mild stress” scenario, similar to the 2008 crash, would result in 28 per cent of companies defaulting and 58,520 jobs lost.
In the case of a second prolonged lock down over the winter, the number of businesses collapsing rose to 43 per cent and around 89,870 jobs were considered at risk.
Dr Galina Andreeva, senior lecturer in management science at the University of Edinburgh’s business school, said focused support tailored to the size of the company from the Scottish Government would help lessen the impact of the economic pressures.
She said: “Our results confirm that the current government efforts to support the sector are going in the right direction.
“However, we would recommend support tailored to company size to maximise impact.
“Firms that show the highest level of adaptability should be rewarded and offered additional support to overcome the crisis, in order to increase
the chances of success in the deployment of public funds.
The withdrawal of current borrowing schemes should be carefully planned in order not to create additional shocks to companies with high debt levels.
“Even once the economy start store open, measures will likely be put in place that cur tail economic activity to some degree—travel will be less common, businesses will have to space workers and customers further apart, restaurants will be serving fewer customers at a time, and sporting events, concerts, and other activities involving large crowds probably will remain off limits for a long time.
“People and business will need to accept this new status quo and adapt. This is the only way to ensure a faster recovery.
“Small businesses have a leaner structure, lower fixed costs and faster decision times.
“These elements will play a major role in the coming months and hopefully provide them with a competitive advantage.”
The study comes alongside other research which suggests the impact on business from Covid -19 is worse in the UK than in other countries such as France and Germany.
Research by recruiter Robert Half, which surveyed 1,500 executives, shows Brazil as the worst hit country, followed by the UK and Belgium.
Most of those in France and Germany indicated that the business impact of the pandemic was largely neutral, said the report.
The majority of those surveyed in the five countries said they were pushing forward with opportunities post-lock down, with digital transformation the top priority for many. Almost a third of respondents said they had redesigned job roles and adopted new business models in response to the virus crisis.
Matt Weston, managing director of Rob er t Half UK, said: “Commercial agility, use of new technologies, effective forward planning and risk management will remain vital to business recovery following the impact of Covid-19.
“Businesses should determine which projects they want to prioritise over the remainder of the year and conduct a skills audit to ascertain if their current workforce is equipped with the capabilities needed to achieve their new-look goals.
“The essential competencies needed to grow their business may have shifted during the pandemic, so they may need to redesign job roles, upskill current employees, or con - sid er new combinations of permanent, temporary and project-based staff in order to build a smart, flexible staffing plan to power their post-lockdown recovery.”