Written evidence submitted by the Association of British Climbing Walls
Response to call for evidence: Sport in our Communities
Indoor climbing has, like many industries, suffered through Covid. We have reopened with capacity caps and are subject to both local restrictions and national lockdowns. During the closed period, our balance sheets were eroded. Since we have reopened, our profits are challenged through capacity restrictions and increased costs associated with maintaining the safety of our customers and staff.
● Balance sheets down between 20% and 60%
● Visitors reduced by between 20% and 50%
● Income reduced by between 20% and 60%
This support would be short term and we believe that the industry would then continue to be self sufficient and return to growth.
This would be spent on:
● Writing off the deferred VAT from Q1 2020 - £2.5M
● Extending the 5% VAT rate to climbing walls - £15M
● Extending and widening the business rates holiday through 2021/22 - £6.5M
As an industry we believe that our future can be safeguarded with £24M of government support through VAT write off, a VAT reduction and Business Rates holiday.
Indoor climbing is a grassroots’ sport. It is often an individual’s first taste of climbing, which can lead to a life enjoying and working in adventure sports. It is also an activity that has 500,000 young people regularly undertaking lessons. In 2018 there were 8m adult visits to indoor climbing walls. Indoor climbing has a history of producing and developing climbers from elite performers to leisure climbers all of whom derive huge social, mental and physical benefit from the activity.
At the moment the entire industry is vulnerable. Covid has had a huge impact on the businesses that provide the facilities. These are almost exclusively individual business owners who have invested their own personal money and guaranteed bank loans to build their facilities.
This evidence sets out in detail how that risk has developed and offers some suggestions of how the risks can be mitigated. We know that indoor climbing was in very good health prior to Covid and we are confident that it will return to health following it.
The data used comes from Market Research carried out at the start of 2019 and from a survey the Association of British Climbing Walls did of its members between 4 and 10 November 2020. We have kept our feedback to your second bullet - Risks to long term viability and how the government can help.
The Association of British Climbing Walls is the Trade Association for UK indoor climbing walls. We have 200+ members representing all branches of the industry from school/community walls to the major group walls. Our mission is to work for the Health, Growth and Professionalism of the Industry.
Throughout the pandemic we have worked very closely with UKActive through our partner the Outdoor Industry Association.
We agreed guidelines for reopening that are aligned with those of the gym sector (through UK Active) and reopened walls across the UK through July and August safely.
There is very little evidence of transmission of the virus in the gym environment and we know that there has been very little transmission of the virus amongst our staff groups. The industry has taken the guidance we have issued seriously and have worked hard to create and maintain safe spaces for customers and staff.
The market has grown dramatically and this will continue for some time to come.
Climbing walls first emerged in the UK around 30 years ago. Over the past 10 years the growth has been enormous. Now, every city in the UK has multiple climbing walls and they are beginning to be established in smaller towns now. They provide a social space in which individuals can exercise. Whilst historically they were the preserve of the outdoor climber wanting to train or maintain their activity without travelling, they are now another part of the fitness sector. Many of our customers do not climb outdoors. Climbing walls are also the primary route into outdoor climbing. We know that once an individual has established a habit of exercising outdoors, this becomes a lifelong activity.
From the Market Research carried out by the ABC in early 2019 there are:
● 65 large walls with Turnover averaging £1m
● 77 Medium walls with Turnover averaging £300,000
● 107 Small walls with Turnover averaging £40,000
The total revenue for the industry in 2018 was £93M.
Since this research was completed, almost 2 years ago, the industry has grown further. In 2019 1 in 5 climbing walls was less than 2 years old (Crystal Market Research). New climbing walls have opened in 2020 and there are a number under construction that will open later this year or early next.
Indoor climbing is going to feature for the first time in the Olympics next year. All the evidence is that this will continue the mainstreaming of the activity and will provide a significant boost in visitor numbers for the industry.
Indoor climbing has many benefits. As a social, problem solving activity it provides well acknowledged mental health benefits. Requiring coordination and flexibility the physical health benefits are broad and of course as climbers improve their skills they require greater strength.
Climbing walls are usually owned and run by individuals.
Historically climbing walls have been set up by individual entrepreneurs. Often climbers, typically they will have built a wall in their home city and will run this with a strong connection into the local climbing community. In the past 10 years we have seen groups of walls become established with the biggest of these owning 8 facilities around the UK. Virtually no private equity is involved in the industry, instead it has been built on personal investment supported by bank loans.
In addition to the private sector walls there are a number of walls based in leisure centres, schools and community and in forces facilities.
Working in a climbing wall is now a real career opportunity.
The industry employs 1,700 FTEs working in the full range of roles. In addition it employs a further 1,350 freelance individuals, mainly instructors and route setters (workers who move the climbing wall holds to continually change the climbs available).
Increasingly working in a climbing wall is now being seen as a career. There are a number of examples of individuals managing walls who started their careers in entry level roles, working behind the counter.
Climbing makes a huge contribution to the health and fitness of the UK.
In 2018 there were 1.5M individual visitors to climbing walls. They made 8M visits.
Of that 1.5M visitors, 120,000 met the Sport England requirements for being ‘regular participants’ (they climbed at least every 2 weeks).
The visitors cover the full age range but there is a concentration between the ages of 18 and 45.
The gender split in usage of indoor climbing walls is 65M:35F.
In addition to the adult visitors, the industry provides a real draw for youngsters keen to be active and to learn how to climb. In 2018 we had 500,000 under 18s climbing on courses run by our centres.
Balance sheets reduced, restricted revenue, increased costs, profits squeezed - real vulnerability.
In the week prior to 23 March 2020, the climbing wall industry began to close down. By 23rd all walls were closed. In England, climbing walls were re-opened on 25th July, in Wales on 10 August, in Scotland on 31 August and in Northern Ireland on 10th July. They have all been subject to restrictions and lockdowns since reopening.
Climbing walls took full advantage of the government support, but maintaining the businesses in a dormant state still took financial resources. Thus, Balance Sheets in the climbing industry have been reduced by between 20% and 60%. Given the structure of the industry (ownership mainly with individuals not Private Equity) it is clear that our members will be significantly weakened by this.
The key features of guidance agreed through UKActive with DCMS for re-opening was:
● Provision of hand sanitisation stations around the climbing wall
● Increased cleaning of frequent touch points
● Increased communication of social distance and hygiene measures
● Capacity restricted to 1 climber per 9sq m of useable floor space to enable social distance to be maintained
Whilst the walls are all very pleased to have re-opened, these restrictions have added to their balance sheet vulnerability.
The capacity caps have restricted customer visits to between 20% and 50% below their previous capacity. In addition, registration on children’s climbing courses has fallen dramatically - a reduction of up to 90% of new registrations. This has led to revenue reductions of between 20% and 60%.
The provision of additional hygiene measures, additional cleaning and signage have all led to increased costs.
These two factors have led to a clear profitability squeeze. As we have only been open for a few months and are now closed again, it’s impossible to get an accurate sense of the impact on year end profitability but these factors have clearly impacted the profits a wall can make and will inevitably push many walls into a loss.
Virtually all climbing walls took advantage of the Government CBILS or Bounce Back loans. At this stage, much of those loans will still be sitting on both sides of balance sheets but as the cash gets used, they will further erode the balance sheet of the industry and repayment costs will start to creep in. The industry has become an estimated £21M further indebted through the government’s schemes. Whilst positive in one sense, this is also clearly a problem, stored up for the future.
All industries are working with uncertainty at the moment. The climbing wall world is no different. We have had the Tiering System and no doubt will do so again when the current national lockdown is lifted. There is the possibility of further national lockdowns in early 2021 and, whilst the vaccine news is positive, it is our belief that we will have to work with capacity caps for the bulk of 2021, if not beyond.
With relatively little cash, the entire industry could be safeguarded.
Deferred VAT - the government should write off the VAT that climbing walls were allowed to defer from the first quarter this year. At the moment this debt is sitting on balance sheets and writing it off would immediately impact these positively. The repayment, due from March 2021 will be a huge cash flow problem for our members, increasing their vulnerability as they try to trade into a stronger position. Doing this will be ‘fair’ across the industry as the VAT owed is directly proportional to the size of the business. Estimated cost to government £2.5M
5% VAT - we appeal to the government to extend and backdate the 5% VAT rate to the climbing wall industry. Operating our businesses with capacity caps has reduced income and running them safely has increased costs. If we were able to hold on to 3/4 of the normal VAT we would pay this would improve cash flow and ensure that more walls are able to break even. Estimated cost for 12 months to the government £15M.
Business rates - climbing walls are housed in large buildings meaning that they have a high rateable value relative to their revenue. Many of our members did not qualify for the rates discount this year. We believe that a business rates holiday should be extended through the year 21/22. This would improve profitability which will improve cash flow and will ameliorate balance sheet reductions. Estimated cost to government £6.5M.
The indoor climbing wall sector works in partnership with a number of organisations who are largely but not exclusively involved in the outdoor world. These organisation include:
● British Mountaineering Council, climbing’s ‘governing body’
● Mountain Training England, Ireland and UK - they accredit instructors and coaches working in our industry
● ABCTT - provider of national awards for young people learning to climb
● OIA - Outdoor Industry Association the trade body representing the brands and retailers linked to our industry
● UKActive - The gym trade body who have lead the work on Covid secure facilities
● Moutaineering Ireland and Mountaineering Scotland - home nation equivalent to British Mountaineering Council who we have always worked closely with
With all these organisations we are interdependent and our mutual viability is tied together.
£24M will support an entire industry
Most of our member walls are hitting their capacity caps, demonstrating that their customers are keen to come back. We believe that when capacity caps are lifted, walls will return to their pre Covid visitor levels and hence revenue levels, though this may take some time. Indoor climbing is still a young sport and it continues to have huge growth potential. However, the longer this return to normality is delayed, the greater the impact on profitability and balance sheets. With the pain that many walls are in at the moment, this will inevitably lead to further closures. We are aware of two climbing walls which have closed down due directly to Covid already.
In addition, having indoor climbing in the Olympics (and we have a real medal prospect from Team GB) next summer will give the industry a real boost.
With government support estimated at £24M the entire sector could be safeguarded and its future guaranteed. This would provide members of the public with access to their exercise facilities, prevent job losses and personal tragedies and ensure that government backed loans can be repaid.