By Ian McConnell
MORE than one in four tourism and hospitality businesses in Scotland could go bust amid the coronavirus crisis, with 58,000 jobs lost, research by the University of Edinburgh shows.
The research, by the University of Edinburgh Business School in collaboration with London-based fintech specialist Wiserfunding, looked at the financial statements of 5,000 Scottish companies in the tourism and hospitality sectors, and considered their profitability and levels of debt. The business school noted 209,000 people were employed in these sectors in 2019.
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Using Wiserfunding’s modelling and technology, it was found that a “mild stress” scenario – equivalent to the 2008 crash with “some downward adjustments by industry experts” – resulted in 28 per cent of firms defaulting, costing around 58,520 jobs.
In a more “severe” situation, assuming a second prolonged lockdown, the level of default rose to 43%, costing around 89,870 jobs.
The business school noted the study also found – “surprisingly” – that most medium and large companies were more at risk of defaulting than most small businesses which “have leaner structures and lower fixed costs, so can adjust faster to challenging conditions”.
Galina Andreeva, senior lecturer in management science at the University of Edinburgh Business School, 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.”
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