More than one in four tourism and hospitality businesses in Scotland could still be at risk of collapse in the fallout of the coronavirus crisis, according to a new report by the University of Edinburgh Business School and credit risk assessment company Wiserfunding.

Based on information gathered from 5,000 tourism and hospitality sector financial statements in the country, the report has found that should said businesses be put under a ‘mild stress scenario’ – equivalent to that of the 2008 financial crash – it would result in 28% of companies collapsing, costing around 58,520 jobs.

If a more severe situation was to occur, such as a second lockdown, the level of predicted job losses could reach almost 90,000, with 43% of companies defaulting.

The study also found that medium and larger companies were more at risk than smaller businesses, which have lower fixed costs and would be more able to adjust in challenging conditions.

“Our results confirm that the current government efforts to support the sector are going in the right direction,” said Dr Galina Andreeva, senior lecturer in management science at the University of Edinburgh Business School.

“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 starts to reopen, measures will likely be put in place that curtail 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.”

Topics