More than a quarter of Scots hospitality firms could collapse due to pandemic

Over a quarter of Scots hospitality businesses could shut down as a result of the coronavirus pandemic, a new report warns.

The financial downturn in the wake of the pandemic is as serious as the economic crash in 2008.

The shocking statistic comes from Academics at the University of Edinburgh’s Business School, who worked alongside credit risk company, Wiserfund.

Researchers studied financial statements from 5,000 tourism and hospitality firms.

Those companies, all in, employed 209,000 in 2019.

It’s been revealed that 28 per cent of the firms would suffer ‘mild stress’, the same as businesses did in 2008.

Around 58,280 jobs would be slashed, according to their figures.

This would spike to a loss of 88,870 jobs and over 40 per cent of businesses going down, if a second lockdown were to be imposed.

Dr Galina Andreeva, senior lecturer in management science, said: “We hope that the results of our study will be useful to governments and business managers to decide where to focus support during the next phase.

“Our estimates should provide an idea of the required intervention in order to assist the industry through these difficult times.

“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.”

The study found smaller companies were less likely to default as they were more adaptable than larger ones.

Dr Andreeva added: “Small businesses have a leaner structure, lower fixed costs and faster decision times.

Coronavirus in Scotland

“These elements will play a major role in the coming months and hopefully provide them with a competitive advantage.”

A Scottish Government spokeswoman said: “Throughout this unprecedented economic crisis we have listened to businesses and business organisations and acted quickly to offer support, which now exceeds £2.3 billion.

“This includes 100% rates relief for pubs and restaurants for the year and a £30 million Creative, Tourism and Hospitality Enterprises Hardship Fund in recognition of the vital importance of the hospitality industry to our economy and the devastating impact of the pandemic.”

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