'Pessimistic' Scottish tourism firms brace for staff cuts and difficult six months

The research by the Scottish Tourism Alliance (STA) showed seven in ten businesses were expecting the next few months to be difficult. A total of 59 per cent of firms who responded said rising operating costs were the biggest threat to profitability, while 50 per cent cited taxation.

The cost-of-living crisis is continuing to hit the industry hard, with 32 per cent saying weakening consumer spending is a major threat. However, 72 per cent have admitted to hiking up their prices despite knowing their customers are spending less.

The alliance is now warning of reduced services and hours, with staff being forced to take on multiple roles in the future. Only 8 per cent of businesses told the STA they expect stability. Fifteen per cent of businesses were expecting to make redundancies over the next six months.

Marc Crothall, chief executive of the STA, said there had been a sharp decline in business confidence ahead of next week’s UK Budget. He warned employers had exhausted all options to reduce costs and were now operating at the limits of what was sustainable.

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“Although many businesses are telling us that trading has been strong in terms of top-up sales, the bottom line is squeezed,” Mr Crothall said. “In nearly all cases, businesses are telling us that as a result of shrinking margins, plans for any investment are severely constrained.

“Many businesses have made all the redundancies they can, are running lean and have no room left to reduce staffing without cutting services or compromising the visitor experience.”

He said the biggest concern was worries over increases to the cost of employing people, such as National Insurance and pension contributions.

Mr Crothall said both the UK and Scottish budgets needed to bring in “meaningful” business rates relief, a “stable and competitive” tax environment and long-term investment in the industry.

When it comes to the Scottish Budget, the alliance wants to see no further increases to income tax, and for tax thresholds to be brought back in line with the rest of the UK. There is also concern about the tourist tax, which will come into effect in Edinburgh next summer and follow in other parts of Scotland, including Glasgow.

Mr Crothall said: “These are the foundations that enable employers to retain staff, support progression and invest in skills. Short-term fiscal decisions may offer temporary wins, but they risk long-term damage to the very workforce the Scottish economy depends upon.

“With the UK Budget days away and the Scottish Budget to follow in January, the Scottish Tourism Alliance is urging both governments to take decisions that restore confidence in the sector, reduce the cost burden on employers and support investment.

“Without meaningful intervention, we risk further contraction, job losses and a decline in Scotland’s competitiveness at a time when we need growth, stability and a thriving visitor economy.”

The UK and Scottish governments were contacted for comment.