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Why more support for our tourism sector is vital

Our region’s tourism sector has proved remarkably resilient over the years, but coronavirus is an existential threat like nothing we have encountered before.

In 2014, when Somerset was hit by severe flooding and the rail line at Dawlish was destroyed in a storm, there was a major impact on visitor numbers, but never before have businesses across the South West been forced to shut up shop for months.

The emergency support from the government has helped to limit the damage so far by keeping businesses going and staff employed. As a firm, we have helped to secure well over £38 million in Coronavirus Business Interruption Loans (CBILs) for many of our clients in the tourism and hospitality sector, as well as other sectors affected.  Assuming similar trends to those nationally, this means an estimated £130 million in combined Bounce Back Loans and CBILs, in addition to the support measures put in place through the Job Retention Scheme, support of the self-employed and rates relief.

This funding is a lifeline for businesses which have been prevented from trading since March and are suffering through no fault of their own.

Clarity is essential

Many of our clients are desperate for clarity about when they will be able to start trading again and what rules they will have to follow in order to do so. Moves towards a cautious reopening in July are extremely welcome, but, even in a best case scenario, this will not be a normal summer season, and many businesses will be unable to trade sustainably while adhering to social distancing requirements.

This is why the government needs to go much further if it is to achieve its goal of preventing, rather than simply delaying, widespread job losses and business failures. Clarity is also essential as businesses look to invest and take measures to adhere to the requirements.

Tourism spend is worth £9.8 billion to the South West economy, supporting around 320,000 jobs in the region.

But many good businesses are now facing an uncertain future. So as we look forward to a possible emergency mini-budget, we’re backing those who are calling for further government support to assist their recovery.

We are particularly keen for the government to explore how taxes and tax credits might assist

The Coronavirus Job Retention Scheme has been very successful in preserving jobs, but if it is withdrawn or scaled back before employers can afford to start contributing to the costs, there will be mass redundancies in the sector. If this comes to pass, the support to date will have simply been a grant to the South West, rather than a true job retention scheme. So we support extending the furlough scheme until tourism businesses are able to see what their medium-term future looks like.

The Prime Minister has indicated that government recognises the particular challenges facing tourism businesses, but hinted that a sector-specific extension of the Coronavirus Job Retention Scheme is unlikely. We look forward to learning more details of the promised support for tourism, and we are particularly keen for the government to explore how taxes and tax credits might assist.

The deadline for deferred VAT payments at the end of March 2021 will put added pressure on businesses when they are still getting back on their feet, and many simply won’t be in a position to start paying tax bills, business rates or loan interest in April 2021.

Investment

In the longer term, the government should incentivise investment in new ways of operating after coronavirus, such as keyless entry systems or smart tech for servicing hotel rooms. Tax credits will help businesses which are in a position to invest, though for many the immediate priority is survival.

Tourism leaders have long campaigned for a cut in VAT on tourism spending to encourage consumers to holiday in this country, and many of our clients would certainly welcome such a move.

We must not forget that ancillary businesses like marketing agencies and web designers have been hard hit too. Encouraging consumers to take staycations – when the rules allow and it is safe to do so – will be an important part of the recovery, and marketing campaigns will have a role to play in that. Extending tax reliefs or grants for collaborative working could assist some of these businesses.

Bringing back a three-year carry back for corporation and personal tax losses would be helpful. And setting time to pay VAT and unpaid PAYE – potentially in tandem with repayment of CBILs – would ensure fuller recovery of the funds outstanding at the Treasury by enabling businesses to trade out of their negative cash flow positions, as well as pay back the loans which are partly or fully supported by government guarantees.

For more information about the range of support schemes mentioned, visit our Coronavirus Updates hub.

FEATURING: Tom Roach
Tom is a partner in the Truro office of PKF Francis Clark with expertise in the tourism and leisure industries. Tom’s leisure sector clients are… read more
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