Scottish independence: what impact on hospitality?

On Thursday 18 September, Scottish voters will have the chance to decide whether or not they want independence from the UK. With the latest polls suggesting the ‘yes’ and ‘no’ camps are neck and neck, Scottish independence is a closer reality than some ever thought possible.

So what impact would independence have on Scotland’s hospitality sector? We looked at the latest research and spoke to some industry experts to find out.

Foodservice growth​

A new report from Horizons suggests that independence could actually be positive for Scottish foodservice businesses, with the industry set to play an important role in the country’s economy if next week’s referendum returns a yes vote.

Horizons estimates that Scotland’s foodservice market is currently worth £3.1bn, some 6.8 per cent of the UK’s total sector. Although the average spend per head on eating out in Scotland is currently lower than the national average, with Scottish consumers spending an average of £602 per year on eating out compared to a UK average of £724, Horizons says there is plenty of potential for further growth.

“An independent Scotland could see renewed interest in eating out as tourism is boosted alongside business,” said Horizons managing director Peter Backman.

“Scotland lags behind the rest of the UK in terms of eating out, and particularly sectors such as casual dining and quick service so we are likely to see growth in these areas.”

Tourism​

Of course, hospitality growth in an independent Scotland would to some degree depend on tourism, which has gone from strength to strength in recent years.

A recent study by LJ Research suggested that independence would not have much of an impact on visits from overseas travellers, with the majority of the 700 people surveyed stating that they would visit Scotland regardless of the referendum decision.

However, it did indicate that independence could have some impact on visits from the UK, with English respondents more likely to state they were less inclined to visit an independent Scotland compared to international visitors (17.1 per cent compared to 8.3 per cent).

@BigHospitality our survey found that it won't make a huge difference but, if any impact, it's likely to be negative. http://t.co/YV5EGwrUr2

— LJ Research (@LJ_Research) September 11, 2014

Sean Morgan, managing director of LJ Research said: “These findings suggest that Scottish tourism businesses don’t have to worry too much about the outcome of the referendum.

“That said, tourism businesses that have high exposure to English markets should tailor their marketing messages and operational services to ensure that those from south of the border are made to feel unequivocally welcome.”

Visitor inclination aside, Scottish tourism could be hit by any changes in visa requirements and currency that independence might bring.

“It is likely that Scotland’s tourism industry will suffer if it cannot continue using Sterling as this factor will likely act as a barrier among inbound visitors’ decision,” said Morgan.

@BigHospitality it might negatively affect Scottish hospitality industry if tourists require to have separate visa than the UK to travel.

— Sujan Uday (@SujanUday) September 11, 2014

Business investment​

Business leaders in the ‘no’ camp have warned that independence would have a negative impact on investment in Scotland, particularly given the uncertainties surrounding currency.

Paul Mildenstein, chief executive of Liberis, said small and medium-sized hospitality businesses seeking funding in Scotland should not be too worried about the prospect of independence, although they should prepare for some short-term effects.

 “From a business funding point of view, I don’t foresee a long-term impact, but short-term you would see all the financial institutions pause as they work out the implications of currency / exchange and capital ratios. 

“The non-bank funders would just have to do some administration work but time would be allowed for the administrative changes required.”

However, construction researcher Barbour ABI warned that the impact of independence on large-scale investments could be more serious.

In particular, it said Scottish hotel and leisure construction projects planned by investors with headquarters outside of Scotland – including the £850m development planned at Edinburgh’s St James Quarter – would be put into jeopardy in the case of a yes vote.

“From my perspective, there isn’t a huge appetite for risk at the moment in the hotel and leisure sector,” Michael Dall, lead economist at Barbour ABI, told BigHospitality.

“I think one of the main reasons that businesses are reacting quite negatively to the prospect of Scottish independence is because, although the recession is officially over, the hangover around investment appetite is still very much there.

“Companies are definitely less willing to embark on what could be termed risky projects and certainly the concern would be that independent Scotland would suddenly represent a risk because the growth outlook would be uncertain.”

Independence would not mean the end of investment in Scottish leisure and hospitality, but private construction contracts are likely to be put on hold until issues such as currency and financial security are sorted out.

“Of course currency union negotiations could progress quickly but I tend to think something like this is something that would drag on for a long time rather than be something that is resolved quickly,” said Dall.

“In my opinion we could be looking at a hiatus period if it is a yes.”

Do you have a strong view on the impact of Scottish independence on hospitality? Join the debate on our Twitter feed.​