Scottish Firms Impact Test
We have considered the impact that these regulations will have on Scottish businesses.
The introduction of a new legal requirement to utilise Certification domestically will have an impact on Scottish companies in a number of ways. Scottish businesses have invested large sums in protective measures. This new requirement will result in financial expenditure and, for some businesses, loss in revenue. Consumers may alter their behaviour and favour settings where Certification is not required. Equally, other consumers could favour settings where Certification is required.
- Will it have an impact on the competitiveness of Scottish companies within the UK, or elsewhere in Europe or the rest of the world?
As has been the case throughout the pandemic, policy divergence could present challenges for organisations operating across different parts of the United Kingdom as they implement different rules and regulations around Certification, and adapt their messaging which could lead to additional costs.
While some aspects of the policy are aligned, there is not a completely aligned 4 nations approach to the mandatory use of Certification. On 17 September, Wales announced that, from 11 October, individuals over 18 years old will have to prove they have a COVID pass, which includes testing as an alternative to vaccination, in order to attend the same settings that are in scope for Scottish Certification. The UK Government have stated in their report 'COVID-19 Response: Autumn and Winter Plan' (14th September 2021) that a contingency 'Plan B' may be implemented that would include a vaccine certification scheme without the option to test negative or to provide proof of recovery from a previous Covid-19 infection within a predetermined time period. The UK Government subsequently published a call for evidence on the proposal for mandatory COVID certification in their Plan B scenario (27th September 2021). They propose the use of certification in all nightclubs, and other venues open after 1am with alcohol, music and dancing and the same events thresholds as the Scottish Government. They are also considering the same exemptions with the addition of 'commemorative events' and 'diplomats or someone working for an international organisation'. At the time of writing, Northern Ireland has not made any announcement regarding domestic Certification.
The divergence between policy across the UK could create competitive advantages and disadvantages for Scottish businesses. Some consumers may feel more secure in an environment with more widespread measures, and therefore prefer to travel to or do business in Scotland. Others businesses, particularly with high numbers of international clients and customers, may prefer to visit business in England where individuals would not be required to present their vaccine status when visiting hospitality venues or attending large events. This may be seen as a less burdensome option. Equally, tourists may choose to visit England, Wales or Northern Ireland rather than Scotland for the same reasons. However, Covid passes have been in operation in other countries for some time and operated across wider settings so a limited certification scheme may not deter prospective visitors to Scotland who may be familiar with similar schemes. It is uncertain at present whether consumer behaviour will lead to wider use of certification in Scotland becoming a net advantage or disadvantage for Scottish business.
A reinsurance scheme for events has recently been introduced by the UK Government. However, it is unlikely that those events covered by Certification in Scotland will be eligible for insurance to cover costs of implementation as the insurance policy has to be in place before the measure affecting operation if the event is announced. This could put Scottish event organisers at a disadvantage compared to businesses in England if a scheme is introduced at a later date there.
Events Industry in the UK
As the requirement for Certification applies to unseated indoor events of more than 500 people, customers may choose to attend outdoor events where there is no requirement, which may give some venues a competitive advantage. However, due to the climate and weather in Scotland, it is worth noting that it is not viable for events to take place outside for large parts of the year and would likely have little impact over the autumn and winter months.
With additional costs incurred through Certification, larger events could well struggle to break even and might therefore lose out in comparison to smaller venues who can continue to host events under 500 attendees.
- How many businesses and what sectors is it likely to impact on?
The industry association "2020 UK Events Report" reported direct spend of £70 billion in the events sector in the UK in 2019. VisitScotland has estimated 9% of the UK total can be attributed to Scotland, representing £6 billion of direct spend to the Scottish economy and also accounting for approximately half of the country's total visitor spend.
Direct and indirect impacts on the Events Industry arising from certification would accrue to venue operators, but also potentially on event organisers, performers, support businesses and ancillary businesses, operating across a range of event types, depending on audience numbers. It is not currently possible to indicate the full range of individual events that would be impacted by the regulations, or the associated number of wider businesses affected. The following data therefore presents a summary of data on businesses associated with staging and supporting of events in Scotland overall.
It is estimated, based on the Inter-Departmental Business Register 2020 and 2019 Business Register and Employment Survey, that there are 3,785 Events Industry businesses in Scotland. Event catering businesses, performing arts, activities of sports clubs and activities of exhibition and fair organisers are such businesses in Scotland that fall under this classification. These businesses operate across 4,625 sites (as some businesses may have more than one site) and are estimated to employ around 56,000 people. It is unclear what proportion of these businesses will be affected by the introduction of Certification as detailed data is unavailable on the scale of services/business revenue generated from the settings within scope. We currently have no specific data on supply chains for these businesses. It is likely that most of these are based in cities and larger towns although it is not possible to obtain detailed data at this time.
Based on the Annual Business Survey 2018, the events industry had an estimated turnover of £1,927 million in 2018 (0.8% of Scotland's non-financial business economy turnover in 2018) and an estimated Gross Value Added (GVA) of £978 million in 2018 (1.0% of Scotland's non-financial business economy GVA in 2018). The local authority areas contributing most to total GVA within the events sector in 2018 were Glasgow City (17%), City of Edinburgh (15%) and Fife (9%).
|Local Authority Area||Total Turnover £m||% of Total Events Turnover||Gross Value Added at Basic Prices £m||% of Total Events GVA|
|Argyll And Bute||26.4||1%||15.4||2%|
|City Of Edinburgh||315.2||16%||150.1||15%|
|Dumfries And Galloway||31.1||2%||17.3||2%|
|Na H-Eileanan Siar||8.6||0%||4.4||0%|
|Perth And Kinross||61.2||3%||32.0||3%|
Small businesses are the majority of the sector. Figures from the Inter Departmental Business Register indicate that in 2020, 96% of businesses in the Events Sector had fewer than 50 employees, 3% had between 50 and 249 employees and 1% had more than 250 employees. Similarly, 50% had a turnover of between £100,000 and £499,000 and 8% had a turnover in excess of £1 million (IDBR, 2020).
Only around 17% of events businesses have a turnover of £500,000 or more. Approximately 1,265 had a turnover of less than £100,000. Of the 655 businesses operating with a turnover of £500,000 or more, 120 (14%) were present in Edinburgh and 85 (12%) in Glasgow. The figure is 7% for Fife, 7% for Highland and 5% in South Lanarkshire (IDBR, 2020).
The Business Register and Employment Survey 2019 indicates that, overall, more than 50% of employees in the sector work part-time (54,000 employees, of which 25,000 are full-time).
Approximately 6,300 (11.1%) of workers in the events industry were self-employed. This is a slightly lower proportion than for the workforce as a whole (12.4%). The proportion of women working in the events industry is similar to the proportion in the overall workforce – 46.6% and 48.8% respectively. However, for Events Catering Activities, women make up 55.4% of the workforce and for Other Reservation Service and Related Activities they make up 72.9% of the workforce.
For the sports sector, Certification will impact on Scottish Rugby home internationals, Scottish Football home internationals, and the home fixtures for all of Rangers, Celtic, Aberdeen, Hearts and Hibernian. The two Dundee clubs may occasionally be affected too. Scottish Rugby have four home fixtures over October and November and the Scottish football team have two. However, for domestic games, one of the Glasgow and Edinburgh clubs will have a home fixture each week and there will be additional domestic and European cup matches where Certification is required.
Late night venues with music, alcohol and dancing
It is estimated, based on the Inter-Departmental Business Register 2020 and 2019 Business Register and Employment Survey, that there are 120 businesses under the heading non-charity licensed clubs. Nightclubs and sexual entertainment businesses in Scotland fall under this classification. These businesses operate across 145 sites (as some businesses may have more than one site) and are estimated to employ around 2,500 people. It is not possible to separate out sexual entertainment venues from this, though it is understood less than 20 operate in Scotland as of 2015. The vast majority of nightclub and sexual entertainment businesses are small (employing less than 50 people). We currently have no specific data on supply chains for these businesses. It is likely that most of these are based in cities and larger towns although it is not possible to obtain detailed data at this time.
- Based on the Annual Business Survey 2018, nightclub businesses had an estimated turnover of £84 million in 2018 (0.03% of Scotland's non-financial business economy turnover in 2018).
- Based on the Annual Business Survey 2018, nightclub businesses had an estimated Gross Value Added of £44.6 million in 2018 (0.05% of Scotland's non-financial business economy GVA in 2018).
- Based on the Inter-Departmental Business Register 2020, it is estimated that there are 120 nightclub Businesses in Scotland. These businesses operate across 145 Sites (as some businesses may have more than one site).
- Based on the Business Register and Employment Survey (BRES) 2019, it is estimated that nightclub businesses provide 2,500 Jobs across Scotland (0.1% of Scotland's Jobs in 2019).
Late Night Venues – Hybrid Venues
There are potentially premises that might be classed as pubs or restaurants in official statistics that could fall within scope of the Regulations.
Stakeholder estimates suggest that there may be around 300-400 premises across Scotland that operate as 'hybrid' venues (e.g. as pubs or restaurants during the day, and late night venues with music, alcohol and dancing at night). Stakeholders have also suggested there may potentially be up to 1,500 premises that may operate with some of the late night venues with music, alcohol and dancing characteristics (e.g. late opening, dancefloors, loud music). However, it is not currently clear the extent to which all or some of these premises would fall within scope of the Regulations.
- What is the likely cost or benefit to business?
There will be costs to businesses that fall within scope of late night venues with music, alcohol and dancing, and businesses involved in staging live events of sufficient size to fall within scope of the regulations. These include both direct costs of compliance with the Regulations, potential losses of footfall and revenue.
Direct costs would arise in the form of one-off costs associated with installation of IT hardware and software to allow staff to check customers' vaccine status, on-going costs such as hiring and paying additional staff to check it, and costs associated with staff training. The extent of these costs would likely vary across businesses, depending on the scope to integrate them into existing staff functions, use existing IT infrastructure, or physical infrastructure. They may also be mitigated across settings according to implementation arrangements, such as use of spot checks outside large venues or stadia.
There may also be costs associated with lost footfall and revenues from unvaccinated customers being unable to access certification, or those deterred from entry because of longer wait times, with footfall potentially displaced to venues not covered by the Regulations. Whilst footfall may be displaced to other venues, these venues will not be comparable as all of the criteria for Certification will not have been met. The inclusion of all venues that have music, dancing and alcohol after midnight was intended to reduce the impact of this displacement (as well as increasing the public health benefit) as comparable hybrid venues to nightclubs are within scope of the scheme. Furthermore, this may reduce over time as greater numbers of people become vaccinated and able to access Certification; impacts may also be mitigated by the reassurance to potential customers that other customers within venues will have been fully vaccinated. There may be further cash-flow pressures on some businesses should introduction of Certification result in those that have purchased tickets for events subsequently becoming unable to attend, and consequently seeking refunds. Lost footfall and revenue may also impact on wider businesses involved in the organization and delivery of events, and dependent on event footfall for revenue.
The benefits to affected businesses arise from continuation of their ability to trade, and from a reduced risk that further, more restrictive measures on capacity and opening conditions are required in order to control spread of the virus. Previous measures have had substantive impacts on revenues for affected businesses, and will have created challenging pressures around business viability.
There may also benefits to affected venues and businesses should this option result in a competitive advantage for settings in scope, as they would be perceived as 'less risky' environments, owing to an absence of unvaccinated people. This may provide reassurance to previously reluctant or risk-averse customers and encourage greater attendance, with positive revenue impacts.
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