Businesses indebted during Covid will not “simply bounce back”, Labour warns

Shadow minister Seema Malhotra has warned that “ministers should not expect businesses saddled with debt taken on to survive the crisis to simply bounce back” as the party published analysis of the impact of Covid on tourist destinations.

Commenting on the research, which found a higher-than-average rise in people claiming out-of-work benefits in areas with the highest proportion of tourism jobs during Covid, Malhotra said the industry has been “hit particularly hard”.

The analysis of ONS figures found that during Covid there was an average rise of 150% in people claiming out-of-work benefits in the 20 areas with the highest proportion of tourism jobs, 38% higher than the average for the rest of the UK.

“While the vaccine rollout and roadmap to reopening is good news for businesses, it’s clear that ministers should not expect businesses saddled with debt taken on to survive the crisis to simply bounce back,” Malhotra said. “It is far from job done.”

A Covid business impact survey this month reported that 14% of accommodation and food service businesses have low or no confidence they will survive the next three months, while 19.7% said they were at moderate risk of insolvency.

“The government must provide businesses with a fair repayment scheme based on the amount they’re making, or risk more people falling out of work and further damage to local economies reliant on trade from tourists,” Malhotra added.

“Labour would do the right thing for businesses and support them so they can deal with the challenges they face. Failure to do so would be morally wrong and economically illiterate.”

The 20 highest tourism areas identified by Labour include destinations such Whitby, Penzance and Fort William, communities where the party has highlighted that tourism directly supports at least one job in every four.

According to claimant count data, Kendal in the Lake District saw a 200% rise in those claiming out-of-work benefits. This is 1,045 additional people compared to before the start of the Covid health crisis in the UK.

Labour called earlier this year for the government to treat debt accumulated by businesses during the pandemic like student debt with firms only beginning to make repayments on the economic support once able to do so.

A spokesperson for the Department for Digital, Culture, Media and Sport told LabourList: “We have provided the tourism, hospitality and leisure sectors with £25bn during the pandemic, including £5bn in VAT cuts, the furlough scheme and support through our unprecedented £2bn culture recovery fund. We are working flat out to help these industries recover swiftly from the pandemic and build back better.”