Coronavirus (COVID-19) Strategic Framework update February 2022: business and regulatory impact assessment

Policy Proposal

In light of the current state of the epidemic and a consideration of future potential scenarios, Ministers judge that the strategic intent guiding our COVID-19 response should be changed to reflect the new calmer phase of the pandemic that we hope to move into:

“To manage COVID-19 effectively, primarily through adaptations and health measures that strengthen our resilience and recovery as we rebuild for a better future”.

Practically, whilst this accepts a level of COVID-19 circulating in society, it ensures that the harm-reduction measures are proportionate and consistent with our broader purpose of creating a more successful, sustainable and inclusive Scotland. It also means that the responsibility for delivering this Framework rests with us all – including government, wider public services, businesses, the third sector, communities and individuals.

As we have all learned over the last two years, management of the pandemic demands a flexible approach and an ability to respond quickly and decisively. Whilst we may be beyond the peak of the latest Omicron variant, we know that there is a continuing COVID-19 risk to manage in the future. There is no absolute certainty in what lies ahead, but by carefully monitoring the situation and having in place effective contingency plans, we can reduce risk and harm in more proportionate and less restrictive ways.

Over the period from initial lockdown in March 2020 through to spring 2021, when the risk of infection was high and before the positive impact of vaccination was fully present and more effective treatments were available, our response was characterised by extensive (though variable) use of legal restrictions and requirements. Individuals and organisations also adapted their behaviours and physical environments to reduce transmission risk.

Since summer 2021, the use of protective measures, both regulations and guidance, has remained important – particularly to deal with the Omicron wave – but has been much more targeted, as the positive impact of the vaccination programme has helped reduce serious health harm.

Looking forward, we expect to be able to rely much more on the beneficial impact of immunity, on the increasing availability of effective treatments, and on routine adaptations to behaviours and environments, to render the use of legal measures at best unnecessary and at worst limited and temporary.

Building an infection-resilient society includes adapting how and where we work, live and access services. We will provide clear and up-to-date guidance on safer buildings and behaviours to ensure we can live and work safely.

But we must also acknowledge the risks we face – of new, more harmful variants appearing or waning immunity. In addition, seasonal factors may shape people’s behaviours and increase transmission, with meeting outside more difficult in the winter months. Each of these - and in particular a combination of them - might cause a period of increased harm from the virus and require us to consider whether, when and to what extent a temporary increase in protective measures was necessary and proportionate. We expect that, often, no additional intervention will be required but we need to be ready to respond if and when it is.

In setting out this BRIA, we have considered three potential policy options with regard to the implementation of the Strategic Framework Update. These are shown below, with associated costs and benefits.

Policy options

Option 1: Allow all regulations to expire in February 2022

Cost

There would be no cost to businesses of this option directly from regulations, but there may be future costs to the extent that the absence of legal public health requirements leads to greater resurgences of the virus (e.g. in response to a more harmful new variant). Should there be a subsequent rise in cases or development of a new variant which increases disease severity, government could be without the necessary framework to respond quickly. Ensuring proportionate measures are in place to combat the virus protects business in the longer term.

If the outlook should change, with no Framework in place, businesses could be left without guidance and support to protect their customers and staff. Furthermore, without reassurance that appropriate and proportionate measures and guidance are in place, consumer confidence could be impacted, and some could exhibit increasingly risk averse behaviours. This could ultimately impact business turnover and staffing, as some could feel unsafe/vulnerable.

Benefits

Businesses have been affected by a variety of restrictions since March 2020, with impacts depending on severity of measures. More recent measures have been comparatively more targeted and less impactful on the overall economy relative to those seen in the early stages of the pandemic (e.g. enforced business closures) but nonetheless evidence and feedback from businesses suggests ongoing impacts on affected businesses. Under this option, businesses would be able to operate in an unrestricted way. While the pandemic could continue to impact businesses in some ways – for example if travel restrictions are imposed in other countries, affecting businesses reliant on tourists, or due to any ongoing risk averse behaviour from consumers, particularly if circulation of the virus increased in the absence of legal public health measures – this option would remove the direct impact of the COVID restrictions themselves on business.

Option 2: Continue with current Strategic Framework, strategic intent and restrictions

Cost

This option would not be likely to have immediate financial implications beyond those associated with continuation of baseline mitigation measures and vaccine certification, and those legal requirements are likely to be lifted in the near future.

COVID-19, and previous restrictions introduced to control the virus, have had a substantial impact on a number of sectors. Businesses across the hospitality, accommodation, leisure and cultural sectors were required to operate under restrictions, or subject to closure, for much or all of the period March 2020 to August 2021. Estimates of direct impacts on GDP are not available from official statistics for a range of activities such as nightclubs, live events venues, theatres, concert halls and cinemas as a standalone part of the economy. Rather, they are contained within broader sections of the economy which have experienced significant impacts. For instance, during the first lockdown output fell significantly over the month of April 2020, compared with the previous month: by 77.3% in the Accommodation and Food Services sector^[2] and by 45.7% in the Arts, Entertainment and Recreation sector.^[3] When further restrictions were re-imposed on Accommodation and Food Services in 2021, output fell 33.5% over the month of January 2021.^[4] These figures highlight the potential order of magnitude of economic loss that could arise from closure. While Scotland’s economy as a whole has returned to pre-pandemic levels of output, these sectors have yet to fully recover: in November 2021, GDP was 8.5% below February 2020 in the Accommodation and Food Services sector, and 17.9% below in the Arts, Culture and Recreation sector, compared with a 0.6% increase for the economy overall.^[5]

The relative impacts of the pandemic on sector viability have varied between sectors and business size bands, with sectors more seriously affected by restrictions for longer periods enduring longer periods of lack of viability (e.g. Accommodation & Food Services, Arts, and Entertainment & Recreation). Over the course of the pandemic, businesses in Accommodation & Food and Arts, Entertainment & Recreation sectors have consistently been more likely to report decreased turnover than businesses across all sectors – 51.6% and 41.8% respectively, compared to 29.8% of businesses across all sectors in the period 24 January to 6 February 2022^[6].

Businesses in a number of the activities affected by this option have been able to trade with a significantly reduced level of restrictions since August 2021. This will have allowed these businesses to begin to generate revenues, and return to normal trading conditions. However, businesses in these sectors have still continued to experience challenges. In the period 24 January to 6 February 2022, 30.3% of businesses in the Accommodation & Food Services sector, and 21.0% of businesses in the Arts, Entertainment & Recreation sectors reported their turnover had decreased by more than 20% compared to what would normally be expected, compared to 11.8% of businesses across all sectors. Consequently, businesses in these sectors could be vulnerable to reductions in trade arising from voluntary social distancing or further restrictions arising as a result of upsurges of the virus, particularly as key support packages such as the Coronavirus Job Retention Scheme (CJRS) have been withdrawn. These trading conditions, along with the sustained losses incurred by many businesses in the worst affected sectors, will likely have a significant impact on their resilience. It follows that borrowing may have increased, levels of debt may have risen, and other sources of resilience may have been reduced.

Despite restrictions at this time being comparatively less severe than those imposed at earlier stages of the pandemic, these impacts are likely to have further weakened resilience of businesses in affected sectors, particularly given key support packages such as CJRS were not in effect at this time, and following a difficult festive period where business organisations reported hospitality businesses experiencing substantial cancellations, reductions in bookings and trade.^[7]

Late night hospitality businesses such as nightclubs, and a number of live event and sporting venues have also been subject to vaccine certification, though there have been differences in the requirements on late night hospitality venues and venues for live events and sports.^[8] Discussion of the potential business impacts and emerging evidence around vaccine certification is contained within the relevant BRIAs and the Evidence Paper from November 2021.^[9] Since November, the Night Time Industries Association (NTIA) has continued to estimate the ongoing impact of vaccine certification on the sector in the region of upwards of 30% on footfall and revenue, including on for those premises that have taken themselves out of scope for the scheme by adjusting operations. Nightclubs were forced to close between 1-24 January and received business support, but the NTIA still reports that ongoing vaccine certification requirements continue to impact trading.

In these circumstances, it is anticipated that the affected businesses will have experienced reductions in revenues, along with cost pressures from cancelling orders for food and drink, payment of ongoing bills, and cash flow pressures. Concerns about the spread of the virus may also encourage individuals to limit their social contacts more generally, through reducing their number of visits leisure and hospitality venues, or reducing the duration of their visits. This voluntary social distancing may also impact on footfall and revenue in hospitality and leisure settings.^[10]

Benefits

The benefits of the current approach stem from the associated reduction in COVID harm from using temporary, targeted and proportionate public health measures. The science around physical distancing has not changed over the course of the pandemic. Close contact for prolonged periods, especially in social settings, particularly indoors with poor ventilation and no face masks is inherently high risk if unvaccinated. Overall the transmission risk on people mixing indoors with no distancing is inherently high despite vaccination given the increased transmissibility of Omicron.

The WHO advise at least 1m, but evidence indicates that maintaining 2m distancing is between 10 and 50 times safer than staying 1m apart (again with no vaccination). In the current situation whereby Omicron needs boosters to be effective. Current measures – including vaccine certifications for a narrow range of higher risk settings – seek to reduce close contact among unvaccinated people.

Based on the current scientific evidence and emerging evidence on the increased transmissibility of Omicron, the introduction of additional measures has been deemed necessary and proportionate to protect public health as case numbers increased at the end of 2021.

Option 3: Create new strategic intent and update Strategic Framework

Cost

The cost to businesses of updating and implementing a new Strategic Framework will depend on any restrictions imposed in response to escalating COVID-19 threat levels. There is no direct impact on businesses of establishing a new Framework. However, depending on the level of assessed threat and subsequent measures to address that threat, there could be a range of impacts.

Since March 2020 a variety of measures have been taken to combat the pandemic, from the severe (such as enforced business closure, severe social distancing measures) to the comparatively mild (such as guidance on face coverings). The return of any restrictions previously imposed would have an impact on businesses, to a greater or lesser degree of magnitude depending on the required measures and their duration.

The Strategic Framework Update would aim to provide as much clarity as possible for planning purposes to people and businesses, while retaining the necessary flexibility to ensure that any responses are appropriately targeted. It outlines possible responses to changing levels of threat.

In a Low Threat scenario, where expected protective measures may not apply in law but may still be advised in guidance as best practice, impacts on business are largely expected to be minimal. Businesses reliant on income from tourists such as those in Accommodation or Hospitality sectors could experience reduced demand should other countries impose travel restrictions. Additionally, risk averse behaviours from consumers could still impact on demand.

In a Medium Threat scenario, there are not likely to be immediate financial implications beyond those associated with potential responses – which might include one or a combination of baseline mitigation measures and vaccine certification in a narrow range of settings, possibly in line with current restrictions at February 2022. While the likely measures deployed under this level of assessed threat would be more targeted and less impactful on the overall economy compared to earlier stages of the pandemic, latest evidence suggest some degree of ongoing impact. In the period 24 January to 6 February 2022 29.8% of businesses reported having decreased turnover compared to what would normally be expected at that time of year. Businesses in Accommodation & Food Services (51.6%) and Arts, Entertainment & Recreation (41.8%) sectors continued to report the greatest impact. These figures reflect a period where requirements regarding face coverings in a number of indoor settings, legal requirement of businesses to take steps to reduce spread of the virus including screens and physical distancing, testing/self-isolation guidance, and vaccine certifications required in a narrow range of settings (including nightclubs and large events) remain in place, alongside high prevalence rates of the virus.

In a High Impact scenario, measures could range from targeted protective measures to extensive protective measures. Evidence from earlier in the pandemic suggests that extensive protective measures would likely have a significant impact on businesses. COVID-19, and previous restrictions introduced to control the virus, have had a substantial impact on the a number of sectors. Businesses across the hospitality, accommodation, leisure and cultural sectors have been required to operate under restrictions, or been subject to closure, for much of the period since March 2020. Estimates of direct impacts on GDP are not available from official statistics for a range of activities such as nightclubs, live events venues, theatres, concert halls and cinemas as a standalone part of the economy. Rather, they are contained within broader sections of the economy who have experienced significant impacts. For instance, during the first lockdown output fell significantly over the month of April 2020, compared with the previous month: by 77.3% in the Accommodation and Food Services sector^[11] and by 45.7% in the Arts, Entertainment and Recreation sector.^[12] It is therefore anticipated that any severe measures required would likely have a significant impact across a number of sectors – although the circumstances in which they would likely be introduced - e.g. the emergence of a more severe and more transmissible variant - would likely see more risk averse consumer behaviours, even in the absence of restrictions.

While exact measures to be implemented will depend on an assessment of the extent and nature of the threat, and on a rounded assessment of the four harms, it is likely that the businesses most impacted will be in those sectors which have suffered the greatest impact of the pandemic to date.

Benefits

By updating our Strategic Framework regularly to reflect the state of the epidemic, we are aiming to provide as much clarity for the future as possible. Publishing our updated strategic direction continues to ensure that we are transparent in our thinking – helping individuals, businesses and other organisations to plan ahead – and ensures that measures remain necessary and proportionate to reduce impact on businesses and individuals wherever possible.

The new strategic intent moves away from ‘suppressing’ COVID-19 to ‘managing it’. In the future, and as far as possible, we intend to rely much less on legal requirements and more on people and organisations making and sustaining the adaptations to behaviours and physical environments that will improve our resilience to the virus and help keep it in check. This will allow businesses more flexibility in their approach to managing the virus, choosing solutions which keep their staff and customers safe while at the same time, being more suited to their individual circumstances.

In terms of adapting where and how we work, live and access services, it will be essential for us to work together to make buildings and settings safer, for example through better ventilation, and in so doing limit transmission. We appreciate that there will be a cost to adapting buildings. However, by investing in the adaptations, organisations will be able to better protect themselves from the impact of any future spikes in cases or more severe variants. We will continue to encourage employers to engage with employees to consider, for the longer term, hybrid working models where feasible and appropriate. We recognise the broader impacts of hybrid working and will continue to work with partners to learn from best practice.

Our health response, particularly our vaccination programme, has increased our ability to manage this virus without recourse to restrictive measures. Looking forward, we expect to be able to rely much more on the beneficial impact of immunity, on the increasing availability of effective treatments, and on routine adaptations to behaviours and environments, to render the use of legal measures at best unnecessary and at worst limited and temporary in effect.

In assessing the benefit of laying out plans for any future protective measures, we must consider the potential for more harmful variants appearing, as well as waning immunity. Furthermore, seasonal factors may shape people's behaviours and increase transmission. These factors, alone or in combination – might cause a period of increased harm from the virus and require us to consider whether, when and to what extent a temporary increase in protective measures would be necessary and proportionate. We expect that, often, no additional intervention will be required but we need to be ready to respond if and when it is.

Our updated Strategic Framework considers our potential response to such scenarios and will help prepare us for this should it become a reality. It is important that we have considered what measures we may introduce in such scenarios. The Strategic Framework’s accompanying Evidence Paper explains the evidence behind this in detail. Key points are summarised below.

A study estimated the effectiveness of 17 non-pharmaceutical interventions in Europe’s second wave and found that business closures, educational institution closures, and gathering bans during the second wave reduced transmission, although the reduction was smaller than in the first wave.^[13]

The UK expert group SPI-B found that there was no sign of decline in effectiveness of interventions when they were reintroduced for a second or third time.^[14] The effectiveness of introducing individual interventions or packages of NPI measures will depend on the epidemiological context in which measures are introduced, baseline public behaviours in place at the time of the implementation and public adherence to NPIs.^[15]

In Autumn 2021 when cases were high, but before the start of the Omicron wave, SPI-B, SPI-M and EMG advised that reintroduction of working from home (WFH) guidance may have the largest impact on transmission in England out of the ‘Plan B’ measures (which also were wearing of face coverings in specific settings and introduction of certification schemes) proposed by UK Government.^[16] They also advised that vaccine-only certification may only have a very small direct impact on transmission. Increasing the range of settings, time-limiting certificates based on last vaccination date, and including proof of a negative test, could increase the potential impact on transmission ^[17]. They considered other measures that would have a lasting impact are regular asymptomatic rapid antigen testing at the workplace, improved ventilation in schools and workplaces and improved public awareness of the requirement to take a test if symptomatic ^[18].

In the event of a rapid increase in infections, Juniper (Joint Universities Pandemic and Epidemological Research) consortium advised that in addition to vaccination certification, face coverings in specific settings and working from home were additional measures that should be considered. Some measures would take longer to implement but would have a lasting impact (listed first), while others are more immediate (but less sustainable) and are listed last.

1. Improved ventilation in schools and workplaces

2. Improved public awareness of hospital capacity status including non COVID-19 pressure

3. Boosters and increased vaccine uptake

4. Test, Trace and Isolate (TTI) (Test and Protect in Scotland)

5. Changes to restrictions and potential lockdowns

6. Antivirals and pharmaceuticals.

7. Travel restrictions.” ^[19]

A UKHSA rapid review on the effectiveness of face coverings published in November 2021 suggests that face coverings reduce the spread of COVID-19 in the community.^[20]

Outcomes are worse for older age groups and some clinical vulnerable people when infected with SARS-CoV-2 and measures to minimise transmission are even more important to protect these people.^[21]

The above analysis and more has informed our response to COVID-19 so far. Adjusting our strategic intent will allow more flexibility for businesses which will reduce economic harm and harms on their sectors. However, to protect the clinically vulnerable and ensure an effective response to any future outbreaks it is also important that our Update outlines plans to respond with measures if necessary.