Coronavirus (COVID-19) domestic vaccine certification: business and regulatory impact assessment

Scottish Firms Impact Test

We have considered the impact that these regulations will have on Scottish businesses. The businesses affected by these regulations will largely be those affected by the previous regulations on certification. This means the analysis presented in the Scottish Firms Impact Test is similar to that presented in the previous BRIA for vaccine certification^[46]. Where relevant, this analysis is repeated and amended below.

The amendment of certification to incorporate evidence of a negative test domestically will have an impact on Scottish companies affected by existing arrangements. This new requirement will result in financial expenditure on equipment and tests. There may be a positive impact on footfall and revenues compared to existing arrangements, though it may not fully reverse losses in footfall caused by certification as some consumers may alter their behaviour and favour settings where Certification is not required. 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.^[47] An extension to this scheme was announced to include theatres, cinemas and concert halls from 15 November 2021. ^[48] The UK Government have stated in their report 'COVID-19 Response: Autumn and Winter Plan' (14^th 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 a record of recovery from a previous Covid-19 infection within a predetermined time period.^[49] The UK Government subsequently published a call for evidence on the proposal for mandatory COVID certification in their Plan B scenario (27^th September 2021).^[50] 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'. Northern Ireland announced on 17 November that certification entry regulations for nightclubs, bars, restaurants, cinemas and a range of other settings will come into effect on 29 November with a grace period prior to enforcement commencing from 13 December.

The reduced divergence between policy across the UK could create competitive advantages and disadvantages for Scottish businesses, potentially in areas close to the border between Scotland and England. 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. Day visiting tourists may choose to visit England 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.^[51] 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 unseated outdoor events where there is no requirement for certification measures until 4,000 people are planned to attend, 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. Any event with more than 10,000 people falls within certification scope.

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 unseated events under 500 attendees.

• How many businesses and what sectors is it likely to impact on?

As the settings affected by certification will not been altered by these regulations, businesses affected will lie within the Event Sector, Nightclubs and Late Night Settings, and Sports Venues.

There is emerging data on shares of businesses that may make use of certification within these sectors. Recent data from the Business Insights and Conditions Survey suggest that for the period 18-31 October, 20.2% of businesses in the Arts, Entertainment and Recreation sector and 23.3% of businesses within the Accommodation and Food Services sector were using, or intending to use, customer Covid-19 checks. These include vaccine certification. Within the Accommodation & Food Services sector, 30% of businesses in the Accommodation sector and 20.8% of businesses in Food and Beverage Services sector were using, or intending to use, customer Covid-19 checks^[52].

Event Sector

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 2021 and 2020 Business Register and Employment Survey, that there are 3,725 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.^[53] These businesses operate across 4,560 sites (as some businesses may have more than one site) and are estimated to employ around 42,250 people (2% of Scotland's jobs in 2020). 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)^[54] 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%).

Small businesses are the majority of the sector. Figures from the Inter Departmental Business Register indicate that in 2021, 97% of businesses in the Events Sector had fewer than 50 employees, 2% had between 50 and 249 employees and 1% had more than 250 employees.

The Business Register and Employment Survey 2020 indicates that, overall, more than half (54%) of employees in the sector work part-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.^[55]

Sports:

For the sports sector, Certification will continue 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. 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 2021 and 2020 Business Register and Employment Survey, that there are 130 businesses under the heading non-charity licensed clubs. Nightclubs and sexual entertainment^[56] businesses in Scotland fall under this classification. These businesses operate across 150 sites (as some businesses may have more than one site) and are estimated to employ around 1,500 people. Over half (56%) of employees working in the sector work part time. 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^[57] 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 2021, it is estimated that there are 130 nightclub Businesses in Scotland. These businesses operate across 150 Sites (as some businesses may have more than one site).
• Based on the Business Register and Employment Survey (BRES) 2020, it is estimated that nightclub businesses provide 1,500 Jobs across Scotland.

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).^[58] However, it is not currently clear the extent to which all or some of these premises would fall within scope of the Regulations, or the extent to which these may have amended their commercial offer to remove themselves from the scope of certification since October 2021.

• What is the likely cost or benefit to business?

There may 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 associated with compliance with the revised Regulations (additional to those associated with compliance with the existing regulations). The analysis below sets out potential changes as compared to previous certification arrangements, which are described in the previous BRIA^[59].

Additional direct costs could arise in the form of affected businesses obtaining stocks of lateral flow devices to provide to customers at point of entrance, should those customers not have proof of vaccination or record of a negative test result in their possession. The extent to which individual businesses may choose to adopt this, and the costs it would involve for individual businesses, are unclear. They would also likely vary across individual businesses and settings. However, this may be adopted by businesses within late night settings and by events venues.

There may continue to be costs associated with lost footfall and revenues from those deterred from entry because of longer wait times or certification requirements in general, with footfall potentially displaced to venues or settings not covered by the Regulations. However, the potential for footfall losses is judged to be lower than circumstances where certification continued without the option of providing a record of a negative test result, as it expands the potential customer base for affected venues; impacts may also be offset to a degree by the additional reassurance to potential customers that other customers within venues will have been fully vaccinated or will have provided evidence of negative test results.

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.