WHEN lockdowns were in force and people were unable to travel beyond their local authority boundaries, it would have been difficult to imagine how conditions could have become any worse for hospitality and tourism businesses in Scotland.

Yet, as inflation spirals ever upwards and firms worry increasingly about surging energy bills and the rocketing cost of doing business, it is now widely feared the current economic headwinds could prove to be even more damaging than the pandemic.

It is truly astonishing that there are business owners in tourism and hospitality who are now of the view that it will be more viable to move their operations into mothballs for winter than remain open and trading.

Even if new Prime Minister Liz Truss concocts a plan that can shield businesses from rocketing utility costs – details of her plans to support households are expected to be announced imminently – the pressure on hotels, bars and restaurants will remain intense.

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Annual consumer prices index inflation increased to 10.1 per cent in July and is forecast to leap further still, and running step by step alongside that is the surging cost of doing business that shows no sign of subsiding.

In the simplest terms, the amount of disposable income people have to spend on treats such as eating out or short breaks will continue to diminish. At the same time, business owners are finding themselves with no choice but to put prices up, given that energy bills alone, in many cases, are 300% higher than they were before the pandemic. It is a vicious circle that will probably take years to break.

In the face of such difficulty, it has been no surprise to see a raft of business groups – the Scottish Tourism Alliance, Scottish Chambers of Commerce, Scottish Licensed Trade Association, UKHospitality and the Scottish Beer & Pub Association – campaign hard for government on both sides of the border to take action to ease the pressure.

READ MORE: Crieff Hydro chief warns of closures as cost rises hit hard

Alongside calls for a cap on energy bills, a plea for a reduction in the rate of value-added tax applied to the hospitality and tourism sector has been a consistent demand. Industry campaigners say the temporary cut in VAT was one of the most helpful measures brought in by the UK Government as the pandemic raged, and have long argued that the 20% rate makes Scotland too expensive compared with most other countries in Europe.

It is a disadvantage that is being felt acutely in the Scottish tourism industry now, given overseas visitor numbers have only recovered to around 70% of their pre-pandemic level.

Marc Crothall, chief executive of the STA, told The Herald: “Businesses within Scotland’s tourism industry are more concerned now than they were during the pandemic. In addition to experiencing the significant decline in consumer spending as a result of the cost-of-living crisis, businesses are now facing immense challenges in relation to the cost of doing business.

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“A reduction in VAT will make things more affordable for the consumer, improve cashflow at a time which is seeing trade plummet and enable Scotland and the UK to become a more competitive tourist destination. Our industry and their customers saw the benefits when VAT was reduced to 12.5% during the pandemic; this is one of the most important fiscal levers which can deliver meaningful and immediate support to our tourism and hospitality sector.

“From a Scottish perspective, lowering of VAT is even more essential if at a future date a transient visitor levy is going to be applied by local authorities. We will need a much lower level of VAT to both help offset any additional tourism levy and compete on price with other key destinations.”

Mr Crothall’s comments came shortly after Stephen Leckie, chief executive of Crieff Hydro and chairman of the STA, told The Herald that the reduction of VAT earlier in the pandemic, initially to 5% and then 12%, had “saved us millions”, when taken alongside the temporary relief from business rates.

While there is clearly a compelling argument to reduce VAT for the sector again – on the basis a more competitive tourism and hospitality industry could convince more people to holiday here and spend more money in bars and restaurants – it is difficult to see the Truss Government countenancing such a move at this stage. Indeed, it seems more likely that the focus of government intervention will be on reducing the energy burden, which reports suggest will cost around £100 billion to deliver.

Ms Truss may well be a small state, low tax, light regulation politician by philosophy, but it is difficult to see there being any financial headroom to pay for a VAT cut at this stage – even though there are plenty who believe that reducing the rate would actually bring in more revenue to the Treasury in the long term, the argument being that it would stimulate more expenditure in the tourism and hospitality sector.

Of course, the call for a VAT reduction is just one of several asks business groups are now making of government of both sides of the Border. Also on the list is action to limit energy bills, which will hopefully be forthcoming, but beyond that other suggestions are being tabled to try and ease the pressure, some more achievable than others.

Given the ideology of the current UK Government, it is difficult to see any leeway being given to industries such as hospitality to make it easier to recruit staff from abroad.

However, there are perhaps more realistic steps that should be looked at. The Scottish Government is to be commended for some of the measures it unveiled on Tuesday to protect people from the rising cost of living, including a combined rent freeze and moratorium on evictions, as well as a freeze on rail fares. The last, as noted by the Scottish Retail Consortium, could help support footfall in town and city centres.

SRC director David Lonsdale also welcomed a commitment by Scottish ministers to review what he described as a “swathe of devolved regulatory interventions being implemented or considered at the present time”, adding that the sooner this is done, the better.

But at the same time it is hard not to have sympathy with the stance taken by the STA, which questioned whether it was right to proceed with the implementation of the transient visitor levy, deposit return scheme and short-term let bill in the coming year.

At a time when costs are spiralling and consumer spending is faltering, it is surely better to hit the pause button on regulations that will heap even more financial strain on employers, no matter how well meaning the spirit behind them is.