Covid-19 response

Quarter of tourism jobs threatened by Covid

More than one in four hospitality businesses in Scotland could go bust if the Covid-19 economic downturn is as severe as the financial crash of 2008, a new report says.

The study, which aims to help governments and business managers decide where to allocate support, warns that 58,000 jobs could be lost in a potential downturn.

Academics at the University of Edinburgh Business School collaborated with Wiserfunding, a London-based fintech firm specialising in credit risk assessment for SMEs, to look at the financial statements of 5,000 Scottish companies in the tourism and hospitality sectors, and examined their profitability and levels of debt.

Previous crises

To predict how these businesses might be affected, the last 20 years of financial accounts for Scottish tourism and hospitality were considered against previous crises such as the Global Financial Crisis of 2008, the European debt crisis of 2009-2011 and swine flu in 2009-2010.

Using Wiserfunding’s powerful models and technology to simulate potential stress scenarios, it was found that the Covid-19 pandemic could cause a so-called “mild stress” scenario – equivalent to the 2008 crash with some downward adjustments by industry experts.

The model predicted that28 per cent of firms may default, costing around 58,520 jobs. 

In a more severe situation, such as a second prolonged lockdown, the level of default rose to 43 per cent – almost half of all hospitality businesses and around 89,870 jobs.

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.

Dr Galina AndreevaSenior Lecturer in Management Science at the University of Edinburgh Business School

Data driven

The study was funded by the university’s Data-Driven Innovation initiative, part of the Edinburgh and South East Scotland City Region Deal.

The study follows an earlier report by the University of Edinburgh Business School, which recommended that Scottish tourism businesses should aim their marketing at UK and German visitors as they are most likely to visit and spend money in the immediate future.

Related Links

Business School

Data-Driven Innovation Initiative



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