Written evidence submitted by Historic Houses

Summary of our submission

Historic Houses is a business association representing 1,500 of the most significant historic houses, castles and gardens across the UK. These places are the bedrock of tourism, the UK’s fifth biggest industry, welcoming millions of tourists, locals and education visitors through their gates every year, and generating over £1 billion in visitor spend.

All our member places are owned independently of government or national charities; most are independent small businesses providing jobs, enterprise and leisure opportunities in rural areas, whose ongoing economic viability is reliant on opening to the public for tourist visits, events, weddings and other forms of hospitality.

The arrival of Covid-19 this spring has put this infrastructure at serious risk. The historic houses and gardens we represent have had to shut completely to visitors. Cashflow has stopped overnight as a consequence. Thousands of weddings and events have been cancelled or postponed. The current situation is therefore a profound crisis for hundreds of historic houses and gardens across the country, and poses severe consequences for the tourism sector more generally.

These businesses greatly appreciate the Government’s emergency support both for them and their staff; the Jobs Retention Scheme, the loans schemes and grants for businesses in the leisure sector are lifelines for many of our members. However, for the heritage and tourism sectors the severe financial impacts of this crisis look set to continue well into 2021 and beyond. Ongoing government support will be needed to ensure the heritage-based businesses we represent have a viable economic future. We would urge government to consider the following support measures:

      Ensure tourism venues are included in the earliest stages of re-openings (if a staged approach is to be taken) wherever possible. Many historic houses and gardens generally have the space and therefore ability to allow for social distancing. With small infrastructure improvements they could, potentially, be reopened at the earliest opportunity.

      DCMS could work with us and fellow organisations across the heritage and tourism sectors to develop clear guidelines for early reopening.

      Withdrawal of government support too soon could see many tourism businesses struggling to stay afloat through to the start of the 2021 season. We urge government to provide the ongoing support seasonal tourism businesses will need, even if much of the country returns to a ‘new normal’ at some point this year.

      We urge government to consider introducing flexibility (such as partial furloughing) in the Job Retention Scheme to allow maintenance and security staff to undertake some work while on furlough, especially in heritage-based businesses where ongoing maintenance is essential. The support offered through the Job Retention Scheme will also need to be extended beyond the lockdown period for businesses unable to re-open for some time.

      Government could help support thousands of wedding venues (and their engaged couples) across the country by putting pressure on the insurance industry to accept their share of the financial responsibility during this crisis.

      Government could help thousands of small heritage businesses take up the CBILS loans by extending the one year zero arrangement fee and interest free period to two years.

      Government could deliver a swift and cost-effective boost for thousands of heritage-based tourism businesses by streamlining elements of the heritage protection system.

      Government could support the recovery of fragile rural economies – in which historic houses and gardens are often key employers and engines of prosperity – through introducing targeted tax reliefs for historic houses and gardens that are open to public visiting and hospitality business. These reliefs could be targeted at sites open to the public by, for example, lifting the cap on Sideways Loss Relief from £50,000 to £100,000 for rural businesses, or reducing the income tax levied on Heritage Maintenance Funds.

      We ask the UK Tourism Minister to work closely with his counterparts in Scotland, Wales and Northern Ireland when it comes to planning the exit strategy. Our members are UK-wide, and the response to a phased recovery across the UK should be too. Coordination between different parts of the UK will be essential to building public confidence, and supporting the heritage and tourism industries through the phased recovery period.

This submission was prepared in April. We will submit further evidence as the inquiry progresses, as and when new information becomes available.

What has been the immediate impact of Covid-19 on the sector?

Under normal circumstances the historic houses and gardens we represent attract 26.8 million visitors on an annual basis. Opening to visitors enables them to share the wonderful heritage in their care with their local communities and with tourists; crucially, it also finances the 34,600 FTE jobs these places support across the UK, as well as funding the ongoing and considerable costs involved in caring for fragile heritage. Between them, these 1,500 historic houses and gardens would usually generate over £1 billion in visitor spend each year – two thirds of which is spent off site in local towns and villages, making them essential to the success of fragile local economies.

This vital economic activity, these jobs, and public enjoyment of these parts of the UK’s irreplaceable historic environment are now at severe risk. Covid-19 has meant all 1,500 of the historic houses, castles and gardens we represent have had to shut to visitors. This means:

• Cashflow into these small businesses – most of which rely on opening to the public in some way for the majority of their turnover – has stopped overnight.

A quote from one of our members: “We would expect to take 70% of our income from holiday lets and house opening (with accompanying merchandise and catering sales) over the next 6 months. Over the next 3 months we expect our income from those sources to be nil, with considerable uncertainty about the subsequent 3 months.”

• The majority of historic houses and gardens have had to furlough nearly all of their staff.

A quote from one of our members: “I have furloughed nearly everybody, and the only job losses are very part time staff; but this will change as we move into the summer and we may have to make harder decisions.”

• Thousands of weddings, festivals and events – some set to attract audiences as large as 180,000 – have had to be cancelled or postponed, with severe knock-on impacts both for venues and for local supply chains. The significant financial (and, in the case of weddings in particular, emotional) consequences are exacerbated by uncertainty as to when weddings, festivals and events may be able to resume, and a total lack of support from the majority of insurers.

A quote from one of our members: “Our wedding venue is a garden venue and the main part of our sales are between May and September. So, despite offering postponements, our cashflow is dire as now final payments will come later. Also, we cannot show new couples interested in booking for 2021 as the venue is shut.”

• The essential maintenance work needed to look after these historic visitor attractions and ensure they are in a fit state to welcome back visitors – such as gardening and urgent conservation work – is at risk. Owners face a choice between furloughing their staff (meaning these essential maintenance tasks cannot be performed, since furloughed staff are unable to do any work) or attempting to keep on gardening and maintenance staff with no certainty as to how they will be able to pay them, since there is no income coming in.

A quote from one of our members: “Historic houses and gardens still need maintaining and expenditure. You can't just leave the garden, it has to be ready for summer so there is so much spring work to do. It's not an office block, you can't just close the door and hand in the key, these buildings have to survive or there will be nothing to return to.”

The current situation is therefore a profound crisis for hundreds of historic houses and gardens across the country, as well as the thousands of local suppliers who rely on their business, and poses potentially devastating consequences for the tourism sector at large. Since the crisis began, we have received hundreds of concerned emails and phone calls from our member houses, setting out in sharp detail the immediate impact of Covid-19 on the heritage and tourism sectors. In early April we carried out a short survey of our membership, commissioned by Historic England, to gauge the severity of the impact. The results make for bleak reading, and are a sobering warning of the scale of what’s at risk:

• Based on the level of free reserves and cash at bank, and current levels of expenditure and income, the survey results showed that after 3-4 months, 53% of respondents will have run out of reserves/cash to be able to continue to operate; this increases to 75% after 5-6 months. One-quarter of respondents reported their level of free reserves and cash at bank as nothing (or less than nothing), with a further one-tenth (10%) reporting reserves/cash of less than £10,000.

• The majority of our members’ turnover is completely reliant on historic houses and gardens being able to open to the public, with at least 64% (and potentially 75%) of survey respondents’ turnover coming from admissions; retail and catering; and events and weddings. A further one-fifth (20%) of turnover comes from a range of other sources – much of which also relies on being open to the public.

• Respondents estimated that the total scale of the financial shortfall will be more than £24.3 million over the next six months.

• Almost two-thirds of survey respondents reported that they were planning to take on seasonal staff during the coming six months and will now no longer do so due to Covid-19. This equates to 1,260 jobs.

Due to the swift turnaround time of our survey, combined with how busy our members are working to stay afloat in the current crisis, the response rate was around 9% of our total membership. This means if the scale of impact above were repeated across the entire membership, the impacts listed could increase by a factor of eleven; for example, the 1,260 seasonal jobs that are no longer available could be more like 13,860, and the scale of the financial shortfall could be more like £264 million.

What will the likely long-term impacts of Covid-19 be on the sector, and what support is needed to deal with those?

Even if historic houses and gardens are able to re-open to the public in the next couple of months – and at the time of writing that is looking uncertain – the majority of the 2020 season for tourism, events, weddings and hospitality will already be over. Even if some of our members were able to attract back some of the major events and festivals that have been cancelled for this year – and that looks unlikely at this stage – the majority of their events income for the whole of 2020 has already been lost.

Most of our member houses and gardens are therefore facing an entire year – looking ahead to the 2021 season, which really gets into full swing at Easter – with zero or vastly reduced income from public opening. Since most of our members rely on public opening for the majority of their turnover (and most rely on income from the busy spring/summer season to get through the leaner autumn/winter period) this means most will be facing an uncertain, worrisome and potentially destabilising six to twelve month period until the 2021 tourism season begins. Many are concerned the impact of this crisis will extend well beyond next year’s season, into 2022 and beyond.

Our April 2020 survey reported the following quotes from Historic Houses members, in terms of longer-term impact on the sector:

      “We have lost 100% of 2020 business and many have postponed till next year, which in reality means I am not going to have new income for new events for two years - so this isn’t a short term hit but a medium term horror.”

      “Like a good number of small historic houses that rely on functions/ visitors we are facing being completely unviable this year and unable to maintain the fragile heritage in our care.”

      “Even if restrictions are lifted soon the knock-on effect will last beyond the rest of this year. We have cancelled summer and autumn events that might be on dates after restrictions are lifted but for which preparations (needed now) can't be done.”

      “The key here is timing for such a seasonal/tourist dependent business - the most worrying aspect is if we re-open towards the end of summer/early autumn, we will have lost the main season, then lose the lifebelt support of the Job Retention scheme and enter a winter period when we remain open throughout but with very low levels of income, very high cash outflow - and trying to retain a large core workforce.”

Support needed

All of our member places greatly appreciate the Government’s support both for them and their staff. The Job Retention Scheme is a hugely important initiative, and is providing a lifeline for many of our members as they work hard to avoid business failure during this exceptionally challenging period. The Small Business Grants and the Business Support Grants for Leisure, Retail and Hospitality have also been very helpful for many of our member places; though some have struggled to access them due to the ‘cliff edge’ of needing a rateable value below £51,000, and others are still negotiating with difficult local authorities.

Looking ahead, the immediate challenges for our historic houses and gardens will be: 1/ gaining clarity from government on when and how they can re-open, and 2/ staying afloat financially until the start of the 2021 tourism season. Clear and robust government support will be necessary in both cases. If government support is withdrawn too soon, many of these businesses will risk running out of cash over the winter period; some could even fail, even if the virus threat is behind us. Business failure would mean closure to the public at a time when the health and wellbeing benefits of access to heritage, culture and the countryside are more important and perhaps more valued by the public than ever before. The financial failure of these places in private ownership would also mean the burden of funding their care and providing public access may fall to the public purse, such as in the case of Wentworth Woodhouse.

With appropriate support from government over the medium and longer term – as outlined below – we hope many of our member houses and gardens will be able to weather the storm and continue to provide leisure opportunities.

Clarity from government on when re-opening will be possible, and including tourism venues in the earliest stages of re-openings

The most pressing concern for our members is gaining clarity from government on when and how they will be able to re-open. Forward planning – such as when to re-schedule weddings that have been postponed, and when to begin accepting bookings for events or holiday lets – is exceedingly difficult with so little certainty as to when resumption of business may be possible, and the knock-on impact of this affects the ongoing financial viability of the business. We would urge the government to consider the particular vulnerabilities of the tourism sector as it prepares its ‘exit strategy’ and ensure tourism venues are included in the earliest waves of re-openings wherever possible.

At Historic Houses we are thinking hard about the steps that will need to be taken in order to reassure visitors that full safety precautions are in place, and are working with colleagues in the sector to develop a set of industry standards. Our member houses and gardens stand ready to implement these standards. Ideas might include, for example, caps on visitor numbers, timed ticketing, strict hygiene protocols and creative solutions for catering outlets. These and other similar measures would be particularly implementable at outdoor venues such as historic gardens in the first instance; similar number controls and social distancing and hygiene controls could be implemented swiftly for weddings and small events or tours.

We stand ready to work with DCMS and colleagues across the heritage and tourism sectors to agree and disseminate clear guidelines for early re-openings.

Financial resilience through to the 2021 tourism season

As mentioned above, for most of our members the bulk of income from the 2020 tourism season looks set to be lost. This means they will need to find creative ways to stay afloat financially through the remainder of the 2020 season and into the quieter ‘shoulder months’, before – hopefully – being able to recoup some losses as the 2021 tourism season begins next Easter.

Government could help many of these businesses to remain viable going concerns through a combination of financial support where possible, and streamlining overly burdensome regulation that is holding businesses back:

• The financial support available to businesses through the Job Retention Scheme and the Small Business Grants / Business Support Grants for Leisure, Retail and Hospitality has been a lifeline for the majority of our member houses and gardens. This financial support is especially important for independently owned historic houses and gardens vis a vis the rest of the heritage sector, since independently owned sites cannot access the Lottery’s emergency funding; the National Lottery Heritage Fund’s ‘Heritage Emergency Fund’ excludes private owners and is therefore irrelevant to the majority of the heritage sector, since most heritage is privately owned. Withdrawal of government support too soon could see many struggling to stay afloat financially through to the start of the 2021 season. We would urge government to provide the ongoing support seasonal tourism businesses will need, even if the country returns to a ‘new normal’ at some point this summer.

• Many businesses in our sector have had to furlough their staff because there is no income being generated to pay them. However, because furloughed staff cannot undertake any work, these historic house and garden businesses will be unable to undertake the maintenance work required to ensure that they are ready to welcome visitors back as soon as the lockdown ends. This situation also means furloughed staff are unable to help keep delicate historic sites secure and free from damage, so that the business doesn’t suffer further. This is particularly concerning, as we are hearing anecdotally that vandalism and damage to historic sites is on the rise. Government is paying for 80% of furloughed staff members’ time, so might there be the flexibility for at least the remaining 20% to be used to protect their employer’s business and therefore their job? We urge government to consider some sort of scheme, or flexibility, to allow at least essential maintenance and security staff to continue working while on furlough, especially in heritage-based businesses.

• The CBILS loans could be an immediate lifeline for many historic houses businesses, but many are finding them difficult to access or are concerned about the impact of the terms. Currently there’s a one-year zero arrangement fee, zero interest basis. We would urge government to consider extending this to two years for hard-pressed heritage and tourism businesses. The capital repayment terms could also prove difficult for many small businesses, since the repayment instalments are non tax allowable – which will create further cash flow difficulties down the line.

• The streamlining of overly burdensome elements of business and planning regulations would go a long way towards helping small tourism businesses keep going and diversify during these perilous times. For example, government could deliver a swift and cost-effective boost for heritage-based tourism businesses such as historic houses and gardens by streamlining elements of the heritage protection system. While robust heritage protections must be maintained, there is significant scope for streamlining targeted elements of the listed building consent system to improve efficiency and effectiveness. Targeted simplifications such as those developed by the sector-led Historic Environment Protection Reform Group (HEPRG) would lead to savings in time and money for both applicants and local authorities. We would urge DCMS to set up a ‘task and finish’ group with MHCLG and Historic England to implement the proposals developed by the HEPRG as swiftly as possible, in line with DCMS’s commitment in its Heritage Statement to “explore opportunities to streamline heritage consent processes, maintaining the current level of protection for the historic environment but reducing burdens on owners…”

• The COVID-19 crisis has essentially wiped out the peak wedding season for 2020, from April through to September, in which 80% of UK weddings take place. As a result, 36% of all weddings planned for this year will not take place in 2020, and 56% will be significantly impacted. This is terribly upsetting for the many couples whose wedding celebrations are now on hold, and our thoughts are with all the couples who may not be able to have the day they had planned. For historic houses and gardens, many of which derive much of their income for essential heritage maintenance from offering weddings, this is a disaster; made far worse by the fact that the insurance industry is largely avoiding its responsibilities. Rather than accepting their role in this unprecedented situation, most insurers have pushed the financial burden back on to the venues – leaving venues with no business interruption assistance, and having to cannibalise their own future business to find new wedding dates for couples who were due to get married this year. Government needs to recognise the severity of the situation facing both engaged couples and the small businesses acting as their wedding venues, and put pressure on the insurance industry to accept their share of the financial responsibility.

• Targeted and measured tax reliefs would deliver huge benefits to businesses based in or around historic houses. The sorts of relief that would really help businesses include:

• Lifting the cap on Sideways Loss Relief from £50,000 to £100,000 or even higher. The cap limits the ability of complex heritage businesses to offset the losses incurred in the maintenance of historic houses against more profitable areas of a rural business. The cap could be lifted for those rural estates where a specific amount of public access is guaranteed.
• The income tax charged to Heritage Maintenance Funds could be lowered from the trust rate (45%) to something more like the basic rate. Over time, the additional number of houses opening for the first time to public access would mean this measure delivers a net positive value to the country.
• Serious consideration could be given to reducing the VAT charged to the repair and maintenance of listed buildings, or if necessary just those open to public access.
• The government could look again at the charging of Insurance Premium Tax, given the huge amounts that are spent each year on insurance.
• Empty Property Business Rates could be waived for the period of the pandemic.

How effectively has the support provided by DCMS, other Government departments and arms-length bodies addressed the sector’s needs?

Our member places greatly appreciate the Government’s support both for them and their staff. The Job Retention Scheme in particular is a hugely important initiative, and is providing a lifeline for our members as they seek to avoid business failure during this exceptionally challenging period. The government’s financial support available to leisure businesses through the Small Business Grants / Business Support Grants for Leisure, Retail and Hospitality have also been taken up by many of our members, with mixed results (some have received their grants very swiftly, others are still in negotiations with difficult local authorities). Few of our members have been able to access the Coronavirus Business Interruption Loan Scheme due to banks offering unreasonable interest rates or conditions.

Historic Houses has been liaising closely with DCMS officials throughout this crisis period – feeding back our members’ experiences ‘on the ground’ and flagging gaps in the support packages available. Officials in the heritage team have been working hard to map these issues, provide briefing and facilitate communication with other Departments where applicable, and we appreciate their ongoing engagement. As a member of the Heritage Council we have also been involved in weekly video conferences with the Minister for Sport, Tourism and Heritage, and we very much appreciate his support during these challenging times.

Historic England’s support has been welcome; they commissioned us to run a survey of our member houses and gardens in April 2020, and have included private and independently owned heritage in the eligibility criteria for their Covid-19 emergency fund (which is hugely welcome but very limited, since the fund totals £2m). We hope to continue to work closely with Historic England as we enter the next phase of this crisis; in particular, Historic England will need to take the lead on working with DCMS and MHCLG to streamline overly burdensome elements of the listed building consent system, as mentioned above.

Unfortunately the National Lottery Heritage Fund’s emergency support package for the heritage sector actively excludes the majority of heritage (which is privately or independently owned) from applying for support. Only a small proportion of the heritage sector – existing not-for-profit grantees – are eligible to apply, meaning the Heritage Fund’s support package is irrelevant for the majority of the heritage sector. This makes the government’s financial support for tourism businesses all the more essential to the future viability of the independently owned heritage attractions we represent.

What lessons can be learnt from how DCMS, arms-length bodies and the sector have dealt with Covid-19?

It is now clear that few organisations in our sector had prepared for the possibility of a major pandemic. Staff awareness of the issues was low, and the immediate responses were variable, with some organisations keeping their sites open for as long as they could while others took early action to ‘lockdown’ and act in the interests of staff, visitors, volunteers and the wider public.

A key lesson learnt is the importance of central guidance being put in place as quickly as possible. Close coordination between DCMS and the tourism departments in Scotland, Wales and Northern Ireland will also be an essential part of the early response in any future scenario.

It is a particular disappointment that the National Lottery Heritage Fund made it a requirement of their Emergency Fund that no ‘private owner’ was able to apply for support. This appears to reflect a fundamental misunderstanding of the heritage sector, where the majority of heritage assets are held privately, including the majority of sites open to public visiting. Private ownership does not imply that the asset is being managed purely for private benefit. On the contrary, over 300 historic houses and gardens in the UK are owned privately and yet open to regular public visiting, school and adult learning visits and community and charity events, throughout the year. None of these sites were able to apply to the NLHF Emergency Fund, bar those few that had established themselves formally as charities.

How might the sector evolve after Covid-19, and how can DCMS support such innovation to deal with future challenges?

The pandemic has underlined just how important the private sector is, as an employer and investor within the heritage sector and therefore how much depends on a vibrant and active visitor economy. A similar lesson was learned during the outbreak of Foot and Mouth Disease in 2001. It was all the more important therefore that the Government support package was launched at speed and in ways that helped to minimise the number of redundancies that were necessary early on.

The fact that most heritage is held privately points to the need for a renewed focus on improving the business conditions in which private custodians of heritage sites operate. In 2017 the DCMS heritage statement committed the government to exploring “opportunities to streamline heritage consent processes” and “reducing burdens on owners and developers”. These commitments were greatly welcome, and if delivered now as we look to the re-opening and recovery phase of this crisis could hold the key to helping the sector get back on a sustainable footing. Restarting the economy will be a difficult process, and social distancing measures may limit the recovery of tourism businesses for some time to come. It may well be necessary to adapt sites before they can reopen fully, including temporary additions to the visitor infrastructure. The DCMS and its main adviser on the historic environment, Historic England, need to redouble efforts to introduce the sorts of streamlining measures that were promised in 2017. Given the pressure that there will be on the public finances, this will be a low-cost way for the Government to ensure that those charged with being the custodians for some of our most precious heritage have an enhanced ability to fulfil their duties by not being wrapped up in as much red tape or unnecessary bureaucracy.

Looking ahead, it will be important to think about ways in which the business environment could be improved for struggling heritage sites owned privately but open to public access. There is certainly room for innovation and creativity in relation to the tax framework for supporting publicly accessible heritage in rural areas. Ideas such as the Rural Business Unit proposed by the CLA might address the significant problems that have arisen for complex heritage attractions due to the cap on Sideways Loss Relief. Similarly, a reduction in the income tax charged to Heritage Maintenance Funds at historic houses open to the public would make these a viable option for supporting the recovery of irreplaceable heritage attractions in countryside communities.