ONE in three Scottish tourism and hospitality businesses fear they are likely to fail this year.

The stark outlook for the sector comes in a new survey of 1,335 businesses, published by the Scottish Tourism Alliance today. It highlights the huge challenges that continue to face the tourism and hospitality sector nearly two years into the pandemic.

More than half of respondents to the survey, which ran from December 17 to January 10, said they had either zero or just one to two months of cash reserves to state afloat, and 68% reported that they were in financial difficulty, citing extreme concern over increased costs, particularly in relation to utilities.

A majority, 52%, said they had been affected by staff shortages over the period.

The findings will heap further pressure on the Scottish Government to lift restrictions put in place over Christmas to combat the Omicron variant, which led to thousands of consumers cancelling bookings for festive parties and breaks.

Customers in hospitality outlets currently have to observe one-metre social distancing and table service is required where alcohol is sold for consumption on the premises under restrictions introduced on December 27. But hopes have been raised that those restrictions will be lifted in the coming days after ministers yesterday removed the 500-capacity for large outdoor events.

Marc Crothall, chief executive of the STA, said: “The strength in the number of responses to the survey shows just how anxious tourism businesses are to communicate the level of deep financial pain and commercial instability they’re experiencing as a result of the recent measures introduced and of course the dip in consumer confidence in line with public health messaging. 

"Emergency financial support from the Scottish Government has been hugely welcomed by the sector, including today’s announcement of a further £9M for the sector to be assigned to coach businesses, day and tour operators, hostels, inbound tour operators, outdoor and marine activity operators and visitor attractions.

"However, for the vast majority of businesses, this won’t touch the sides of what is evidently a gaping chasm between business failure and any sense of stability."

Mr Crothall said the survey findings underline the case for further government support from the sector, and reiterated calls for the reduced rate of value-added tax applied to the industry to be retained at 12.5 per cent beyond March 31. It is currently due to be restored to 20% at that point.

Mr Crothall added: "What our survey highlights is a much greater opportunity and the need for governments to leverage supportive policy around areas such as business rates, the retention of the current rate of VAT beyond March and remove potential barriers which are recognised as being significantly detrimental to business survival and recovery. 

"We need to see a commitment to supporting a robust marketing campaign to stimulate the international market which our visitor economy, particularly city destinations are so reliant on."