As a former participant in the in-bound tourist industry (Scotland/U.K.) I have been carefully monitoring the unfolding ‘lockdown’ and resultant industry freeze via social networking and personal contacts. Prior to starting my tourism business I had a long-term career in finance. In light of the prevailing unprecedented conditions I am taking this opportunity to combine my lifetime business experiences to provide some hints and tips which may be of help to small and medium- size  businesses operating in the U.K. tourist sector, e.g. accommodation providers, tour operators, activity providers, etc.

Key Rehearsals

·         The deadly Covid 19 disease has spread throughout the world. A preventative vaccine is unlikely to be ready until September 2021 at earliest and even then the various authorities will have to address the logistics of vaccinating billions of people. In the meantime there could be second and/or third waves of the virus sweeping through populations.
·         The current economic downturn arising from ‘lockdowns’ is extremely harsh and has been compared to the Great Depression of the 1930s. High unemployment rates will have a negative effect on discretionary spending such as travel.
·         Some countries are now experimenting with modest relaxations of the ‘lockdown’ conditions but in isolation such are unlikely to result in a ‘V’ shape economic rebound any time soon.
·         Social distancing is likely to be a feature of everyday life for some to come.

Suggested Action Plan

No one can predict length of the current crisis or the resultant psychological scars on business owners. However, it hoped that the following list will provide relevant information to assist owners and managers to determine a credible forward strategy. This section is aimed at people/businesses with external finance such as mortgages, business loans, overdrafts, credit cards and vehicle finance.
1.       Grasp the ‘big picture’: On assumption your business is seasonal, with peak sales and cash flow generated during the April-October period, then, in reality, there is a possibility you may have to endure up to *two years with negligible revenue. (*Winter 2019/20, summer 2020, winter 2020/21 and summer 2021.)

2.       Realistic forward cash flow projections are vital. Your existing accounting software may have this option or you can engage with your accountant for help or avail of online proprietary products. Alternatively, you could undertake a simple, manual exercise by using *2018 bank statements and extract therefrom all mandatory outgoings and determine if you have the requisite cash resources and/or revenue to cover the outgoings in the event of nil revenue for 2020 and, say, 25pct of 2018 revenue for 2021. Your financiers will insist on credible cash flow projections. (*This assumes 2018 is a typical year.)

3.       Budget for a rise in taxes of, say, 10pct. The current support package extended by the U.K. government will have to be paid for.

4.       Exercise care if you rely on an overdraft, especially if such is hard core and does not fluctuate into credit. Such a facility can be called in by your bank at any time and thereby, possibly, trigger a collapse of the business. If there is a hard core element then could such be converted to an amortising loan?

5.       Carefully monitor all financial obligations such as bank loans, vehicle finance, credit cards etc. If payments start to slip then such will feed through to your credit rating which will, in turn, affect your ability to borrow and function in the future.

6.       If you have identified a funding gap then options could include (a) the government’s loan scheme (b) realising personal assets or even (c) crowd funding. As regards (a) bear in mind loans have to be repaid from surplus cash flow and, in regard to (c), crowd funding may not suit everyone.
7.       Undertake a review of your skill sets. If, in a worst-case, the business has to close or be mothballed then you will need to explore other income generating opportunities.
8.       If you have the resources to continue the business then consider how you will manage the disease risk should tourism re-start, in particular protection for owners, employees and other guests, especially groups.

9.       If the business is likely to be moribund for the intermediate future then consider disposing of surplus assets such as vehicles and thereby terminate related finance arrangements.

10.   If, in the final analysis, the business is not deemed viable then consult with your professional advisors (e.g. lawyer and/or accountant) on the best way forward. It is best to be in control (as far as possible) rather than have events dictated by others.

The foregoing information is provided in a spirit of helpfulness in context of the current business environment. It does not purport to be exhaustive and individual circumstances may vary. Crucially, no legal liability can be accepted. Whenever possible business owners should seek advice from their appropriate professional advisors.


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