Coronavirus (COVID-19) vaccine certification: evidence paper

7. The economic impact of vaccination certification

7.1 Businesses and sectors affected

The introduction of certification is considered against the alternative of not introducing a certification scheme, although the latter option is not likely to have any immediate financial implications for businesses. However, if the state of the epidemic requires further more restrictive measures such as closures to be considered, the negative economic impact on these sectors is likely to be significant.

The introduction of certification would allow specific high-risk settings, which have either been closed for long periods of time throughout the last 18 months or operating at reduced capacity, to remain open and to provide a safe experience for customers and to allow businesses to continue to operate.

The Business Regulatory Impact Assessment sets out the relative costs and benefits of certification options and will be published shortly.

7.1.1 Sectors, businesses and individuals affected

The certification system as described in section 3.2 will potentially affect:

• Late night venues, their workforces and customers;
• Indoor cultural performance venues associated with live events, particularly larger venues that stage unseated performances;
• Outdoor venues associated with large cultural or sporting gatherings, such as larger sports stadia and racecourses;
• Conference centres, in instances where staging large scale seated or unseated live events, trade fairs, markets or exhibitions;
• Businesses involved in the organization and staging of live events, such as performers, event promoters, staging and production businesses, associated supply chain businesses;
• Ancillary businesses dependent on live events (e.g. food and drink sales, merchandising).
• Prospective attendees at live events.

7.1.2 The number of businesses potentially affected

Events industry

The industry association "2020 UK Events Report" reported direct spend of £70 billion in the events sector in the UK in 2019. Visit Scotland 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^[233]. 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. Not all of these businesses would be in scope, however, 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^[234]) 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 form the majority part 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. Source: Annual Population Survey, Jan-Dec 2019, ONS.

Sports

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 4 home fixtures over October and November and the Scottish football team have 2. 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^[235] 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^[236] 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).^[237] However, it is not currently clear the extent to which all or some of these premises would fall within scope of the regulations.

7.2 Nature and scale of economic impacts

7.2.1 Context

The sectors impacted by certification are also those that have been hard hit by the impact of the pandemic as a result of restrictions that have required long periods of closures and limits on their operating capacity.

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 – 44.0% and 56.1% respectively, compared to 27.1% of businesses across all sectors in the period 23 Aug to 5 Sept 2021. In this latest period, 11.6% of businesses in the Accommodation & sector, and 17.9% of businesses in the Arts, Entertainment & Recreation sectors reported their turnover had decreased by more than 50% compared to what would normally be expected, compared to 4.4% of businesses across all sectors.

The sustained losses incurred by many businesses in worst affected sectors will likely have a significant impact on resilience. It follows that borrowing will have increased, and cash reserves will have been depleted for many businesses. Even as profitability approaches pre-COVID-19 levels in the worst affected sectors, businesses in these sectors could be vulnerable to any further restrictions, particularly as key support packages such as furlough scheme are withdrawn.

7.2.2 Impact on costs

Certification will increase administration costs for businesses and administration difficulties at a time when businesses in the sectors have weak cash flow. For example, the Night Time Industry Association reports that night time businesses that were closed until 9 August are carrying on average a debt burden of £150k, which now needs repaid. Consequently, many will no longer be suitable for further lending thus their resilience to cope with further impacts is significantly diminished.

Costs will include

• Additional resource for staff to check certification.
• Dedicated hardware to scan or read certification (mobiles/tablets) and/or install technology to check QR codes at automatic entry barriers.
• Cancellation of tickets and refunds
• Additional policing costs arising if there are scenes of disorder at sports stadia due to long queues caused by certification checks.
• For business events, additional complexity of exempting one element of the programme (e.g. standing receptions), with associated cost and reputational risk of denying delegates who are attending this and all other elements in a work capacity. Business event professionals have shared that the majority of high value business events in Scotland encompass receptions that would be in scope (500+).
• Loss in revenue if customers choose to visit venues and events which do not require certification (see next section of impact on footfall).

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. These costs may be higher for businesses which have not delivered a similar function historically, such as venues which have previously not had a need for door staff and will now require staff to check certification at the point of entry.

Staff costs represent a large component of the overall running costs of businesses in these sectors. For example, in Accommodation and Food Services sector staff costs account for 42% of total costs and in Arts, Culture and Entertainment sector staff costs account for 18% of total costs (compared to 25% across all sectors)^[238].

Overall impacts on staff costs would likely vary across businesses depending on several factors, particularly whether the regulations' requirements could be accommodated within existing staff responsibilities or would require additional staff. If the latter were required, costs would be influenced by factors such as numbers of staff required, and number of hours required each week. It is not currently possible to give an estimate of the overall magnitude of additional staff costs for the reasons set out above. However, hourly and weekly gross wage costs for occupational groups that would be affected by the regulations are set out the Table 1 below. It should be noted that these statistics do not include non-wage labour costs, such as Employers' NIC and pension contributions:

Table 5: Gross Mean Hourly and Weekly Pay, Selected Occupations, 2019

	Mean Gross Hourly Pay, £			Mean Gross Weekly Pay, £
	All	Part-Time	Full-Time	All	Part-Time	Full-Time
Security Guards & Related Occupations (SOC 9231)	£11.09	£12.50	£10.91	£409.30	£216.20	£467.60
Bar Staff (SOC 9265)	£8.37	£8.38	£8.36	£151.90	£123.30	£303.40

Source: ONS, Annual Survey of Hours and Earnings 2019, Tables 15.1a, 15.5a: Earnings and hours worked, region by occupation by four-digit SOC: ASHE Table 15 - Office for National Statistics (ons.gov.uk)

It is noted that there is a widely reported difficulty in securing sufficient numbers of stewarding staff at present, due to labour shortages, which could be exacerbated during COP26. There is also evidence of continued strong growth in vacancies in hospitality staff^[239]. Both of these could create challenges for affected businesses in recruitment of numbers of staff required as a result of regulations. However, it is possible that more people could be encouraged to return to the industry if they perceived the workplace venues as less risky.

The magnitude of these costs will be closely linked to the level of enforcement expected from businesses, the footprint of venues and flow of customers at venues and events. Regulations would impose a legal requirement on the person operating the business or premises to 'take all reasonable measures' to ensure that only those fully vaccinated or exempt are admitted, with guidance used to set out what reasonable measures may be in different settings. The Scottish Government has proposed that reasonable measures will include enabling businesses to check vaccine certificates initially either visually or by scanning the QR code with a view that the number being scanned increased over time. For late night venues, and for smaller events, the expectation would be that this would transition over the first month of operation to a 100% check on entry, given the option for a visual check. For large events, the Scottish Government has proposed that what is reasonable should be assessed by business on a venue by venue basis.

It has been indicated by businesses that a 20% visual check at sporting events may be achieved with minimal additional resource, however the Scottish Football's COVID-19 Joint Response Group estimates that the cost of creating and staffing an outer cordon in sports stadia could cost upwards to £5,000 per game, and that is before technological infrastructure costs.

The technology investment may be a one-off expenditure for businesses, with requirements to issue staff with dedicated hardware to read certification such as mobile phones or tablets.

Scottish Rugby have indicated that providing scanning technology to stewarding staff to check QR codes, if it were a requirement, could cost in the region of £35,000. This provides an indication of potential similar costs at comparable sized stadia in Glasgow, of which there are three. The costs to SPFL football clubs in Edinburgh and Aberdeen could be in the region of a third of this each.

Alternatives to staff checking certification in person are being considered, with Scottish football clubs exploring the potential to pre-load vaccine certification on to season ticket databases to minimise costs and disruption on match days due to the high proportion of season ticket holders attending matches. The development of such capabilities would require an initial investment and ongoing administrative costs to operate. It is not clear what the cost of this infrastructure would be at this time.

This option has further financial impact on events which run over a prolonged period of time such as trade fairs and exhibitions which often run over a number of days. The combination of extended event times and changeover in attendees would require consistent staffing capacity to check certification.

There may be additional costs associated with enforcement and subsequent policing due to Certification. Given the limited scope of the certification scheme we would anticipate these being absorbed as part of the work of EHOs and Police Scotland relating to enforcement and adherence at larger events

It is noted that businesses engaged with through stakeholder engagement noted that there is a significant risk to the reputation of businesses based in Scotland or those holding events in Scotland that cannot be quantified. But this could also be used to demonstrate that Scotland is a safer place for events to take place.

Businesses involved in the organisation and staging of live events and ancillary businesses dependent on live events (e.g. food and drink sales, merchandising) may experience knock on effects from the impacts experienced by venues and events

The impact on business profitability has been raised consistently with many sectors highlighting that their members are already running with high levels of debt due to closures during the pandemic and therefore a reduction in customers or an interruption to normal trading will put some business premises in a more difficult financial position

There are concerns about having enough staff to implement the new scheme, given shortages of personnel, businesses have concerns about having to check all customers, as this would cause unacceptable delays for them to enter venues, potentially leading to crowd compression and therefore greater risk of transmission.

Further details on costs of options are set out in the Business Regulatory Impact Assessment that will be published imminently.

7.2.3 Impact on footfall

Certification may also impact footfall result which in turn could result in a loss of trade and revenue for participating venues, with consequent pressures on individual businesses' viability.

Footfall could be impacted in the following ways:

• Those without certification would be refused entry (which in turn depends on numbers vaccinated)
• Others may be reluctant to attend if non-certificated friends were unable to attend
• Entry delays could deter customers if onerous.

On the other hand, custom could increase if customers feel safer, particularly amongst higher spending older customers.

If capacity limits are maintained at events than certification can only increase revenues if the number of events that go ahead increases. However if certification is accompanied by lifting capacity limits then the costs of obtaining local authority approval will be removed and revenues may rise as more people are able to attend.

7.2.4 Wider impact on consumer choice and market impacts

Certification will potentially restrict some consumers' ability to attend nightclubs, AEVs and live scale events, and potential displacement to less regulated alternative venues and settings. This may place increased pressure on businesses involved in these activities through reduced footfall and turnover, with consequent pressures on business viability. This pressure may encourage business exit if sufficiently severe and long-lasting; however, it will also be influenced by consumers' decisions around vaccine uptake, and the duration and severity of the wider pandemic.

There is potential for displacement to other less regulated settings (e.g. pubs) or greater competition for events providers and venues from other geographies. This may strengthen suppliers' incentives to compete across different markets.

Further details on wider impacts are set out in the Business Regulatory Impact Assessment that will be published imminently.

7.2.5 Impacts of closure

However, if the state of the epidemic requires further more restrictive measures such as closures to be considered, the negative economic impact on these sectors is likely to be significant.

COVID-19, and previous restrictions introduced to control the virus, have had a substantial impact on these sectors. Estimates of direct impacts on GDP are not available from official statistics for nightclubs and live events venues as a standalone part of the economy, rather they are contained within the following sections of the economy who have experienced significant impacts. For instance, during the first lockdown output fell significantly over the month of April 2020: by 77.0% in Accommodation and Food Services and by 42.6% in Arts, Culture and Recreation sector. When further restrictions were imposed on Accommodation and Food Services in 2021 output fell 30.5% over the month of January 2021. These figures highlights the potential order of magnitude of loss in economic output that could arise from closure^[240].

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 have endured 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 – 44.0% and 56.1% respectively, compared to 27.1% of businesses across all sectors in the period 23 Aug to 5 Sept 2021. In this latest period, 11.6% of businesses in the Accommodation & Food services sector, and 17.9% of businesses in the Arts, Entertainment & Recreation sectors reported their turnover had decreased by more than 50% compared to what would normally be expected, compared to 4.4% of businesses across all sectors^[241].

The sustained losses incurred by many businesses in worst affected sectors will likely have a significant impact on resilience. It follows that borrowing will have increased, and cash reserves will have been depleted for many businesses. Even as profitability approaches pre-COVID-19 levels in the worst affected sectors, businesses in these sectors could be vulnerable to any further restrictions, particularly as key support packages such as job retention scheme are withdrawn. It should be noted that, unlike the first and subsequent lockdowns, the support schemes in place in future will be different with, for example, the furlough scheme ending in September 2021. This would exacerbate the economic impact of closure for businesses in these sectors.