Written evidence submitted by the Inland Waterways Association

Call for evidence - Impact of Covid-19 on DCMS sectors

Background to the Inland Waterways Association

The Inland Waterways Association (IWA) is the membership charity that works to protect and restore the country's 6,500 miles of canals and navigable rivers.  IWA is a national organisation with a network of volunteers and branches who deploy their expertise and knowledge to work constructively with navigation authorities, government and other organisations. 

1. Introduction

1.1  IWA thanks the Department for Digital, Culture, Media and Sport for the opportunity to submit evidence on the impact of Covid-19 on sectors under the Department’s remit, including tourism and heritage. 

1.2  We submit this evidence in respect of businesses based on the country’s inland waterways, which collectively provide an important contribution of circa £1.5bn per annum in GVA to the UK’s tourism and leisure sector.  If significant numbers of waterway businesses fail through lack of support, it is not just tourism that will suffer but also the built and natural heritage of the country’s inland waterways network.  

1.3  The UK’s inland waterways bring value to the whole nation in terms of improved physical and mental health through opportunities for holidays, exercise and recreation, as well as financial benefits to local economies through tourism, employment and regeneration.

1.4  Since the middle of March we have been gathering information and asking for Government support for waterway businesses.  We have done this as an independent charity campaigning for the good of the UK’s inland waterways, and for the benefit of the public who use these canals and rivers, both on the water and beside it.  We have worked in partnership with other organisations including Canal & River Trust, the Broads Authority, British Marine and Waterways World.  This collaboration has produced a comprehensive, balanced and compelling call for action.

2.  Key Facts
 

2.1  The inland waterways leisure industry is worth approximately £1.5bn to the UK economy but waterways businesses are disproportionately impacted because many do not have land premises that qualify them for existing Government support.
 

2.2  The high dependency on income during the spring and summer months means that the Covid-19 crisis has hit at the worst possible time, with annual expenditure already having been paid out in maintenance and running costs over the winter. 

2.3  The majority of waterway businesses had to cease trading completely while restrictions are in place.  Some businesses have already closed permanently, with many more at significant risk of collapse before the end of the year.

2.4  Many inland waterway businesses have little or no access to the grants, loan schemes or rates rebates currently being offered by Government.  Business owners are wary of taking on loans which would have to be paid back next year despite having lost this year’s income. 

2.5  Without the breadth and variety of waterway businesses, from trip boats and hire boats to the boatyards that maintain them and all the other leisure activity that takes place on our waterways, we believe that the very infrastructure of the inland waterways is under threat.

3.  Evidence

3.1  Over the last few weeks we have had online meetings with the inland waterways policy team at Defra, written to Rebecca Pow MP, Parliamentary Undersecretary of State for Defra (in a joint letter with British Marine, the Broads Authority and Canal & River Trust) and conducted a survey of 1500 waterway businesses in partnership with Waterways World.  The survey findings contributed to the copious amounts of evidence and information we have provided to Defra, and a report outlining the results are included as an appendix, below.  We have also addressed a meeting of the All Party Parliamentary Group for the Waterways, called to discuss this very issue, which resulted in the APPG writing to Defra, HMT, DCMS and the Welsh Government. 

4.  What we are asking for

4.1  Although the waterways are slowly opening up in line with the Government’s relaxing of the Covid-19 restrictions, and some waterway businesses are able to start up again, many cannot yet resume their operations. Some boat hire companies, for whom a large proportion of income is from overseas tourists, are already facing an almost complete loss of a whole year’s income. Even those which can re-start will have lost up to 50% of their annual takings by not being able to operate for the first 3 months of the 2020 season.  These businesses may survive through the summer, but our concern now is that they will not survive the winter and many will go out of business before the start of the 2021 season next spring. 

4.2  We are asking for a funding package of £20 million, similar to that made available to the fishing industry, to be distributed by the navigation authorities to those waterway businesses who need it the most. 

4.3  This funding package will not only help those individual waterway businesses, but will also ensure that navigation authorities can continue to maintain the infrastructure of the waterways that are entrusted to them, so that the long term sustainability of the waterways network is protected.  This support from Government is essential if we are not to see long term closures of some waterways, as well as a massive reduction in the circa £1.5bn per annum in GVA that the waterways provide through the tourism and leisure economy in England & Wales.

The Inland Waterways Association
18th June 2020

Appendix - Impact Of Coronavirus Crisis on Waterways Businesses - Report based on joint WW-IWA Survey of 1450 waterways businesses

IMPACT OF CORONAVIRUS CRISIS ON WATERWAYS BUSINESSES

Report based on joint WW-IWA Survey of

1450 waterways businesses

Report prepared by Peter Johns,

Publisher of Waterways World and Chairman IWA Marketing Committee

18th April 2020

1. Survey Response

1452 businesses on a database of waterway businesses owned by Waterways World were contacted by email (10/04/2020) and asked to complete a short survey of up to 18 questions. One reminder was sent to non-responders. IWA commercial corporate members also received the email but this dataset is much smaller and largely a subset of the WW data. WW senior management staff made direct personal contact with a number of key industry businesses to ensure their participation. At the time of the analysis 258 responses had been received (18% response rate).

The data covers almost exclusively England & Wales only and is focused on waterways managed by Canal & River Trust but with some coverage of other waterways.

The range of types of business responding is summarised here.

CHART 1.1

Because many waterway businesses operate in multiple categories and limited time available a detailed analysis of how representative this is of the whole industry is not yet available. A brief assessment of the key sub-sectors shows good representation:

• The boat hire sector has above average representation (52 responses from 130 companies in the WW database self identifying as hire operators).
• Boatyard services (16 responses) are under represented – our database holds 400+ boatyards, but this overstates the number of individual businesses and some will have self classified in other categories. There will be particular “fluidity” in classification between Boatyard Services/Chandlery/Marina & Moorings Operators.
• Of 171 boat builders in the database there were 36 responses (20% response rate).

2. Business Size

Many waterway businesses are very small “one-man” operations, as Table 2.1 below highlights. There are, however, some much more substantial businesses. Taking a mid-point of these turnover ranges (£60k for smallest category and £3m for largest) suggests combined turnover of £119 million. More conservative figures still suggests a combined turnover of c.£100million. Grossing up to our total database would give a total sector size of £560-660milllion (note geographical limitations of our data, indicating a significantly higher figure for all inland waterways businesses).

TABLE 2.1

Table 2.2 considers business size by number of employees. This further highlights the number of micro businesses – with one-third of respondents employing a single person and almost another third employing only 2-3 people. At the other end of the scale there are 5 businesses employing more than 100 people. The responding firms on average have 9.09 people working for them (note these figures include all engaged in the business including owner).

Using mid-points for the ranges a total number of people engaged by the respondents is just over 2,265. The most extreme low end assumptions still generates a figure of 1,350. For the sector in total this represents the livelihoods of 8-13,000 people. As with the turnover data this will be an underestimate for the whole inland waterways sector.
 

TABLE 2.2

Impact on total turnover

Table 3.1 below shows 72 of the 258 respondents reported a complete collapse of turnover following the coronavirus crisis taking hold and a further 54 a decline by over 75% - that is around half reporting 75%-100% reduction. At the other end of the scale 15 respondents report less than 10% drop. It tends to be the smallest businesses that have suffered the biggest impact – they will be the least diversified businesses with typically a single income stream. Nevertheless some of the largest firms have suffered massive drops in income – the largest firms with the larger losses are almost exclusively hire boat or trip/passenger boat businesses. Predictably this sub-sector has been hardest hit.

TABLE 3.1

Table 3.2 below attempts to translate the estimated losses for each business in Table 3.1 into total values of losses by size of business. Again it utilises a base assumption of mid-points for each range. On this basis losses for the survey respondents come to £72.7million (on an annualised basis). This would equate for the whole sector to £400million+ of losses.

TABLE 3.2

3. Seasonality

Although the impact estimates identified in the previous section, the industry is a highly seasonal one. Particularly so for the hire fleets, trip and passenger boats. 72% of survey respondents said that their business had a marked seasonality. Survey respondents were asked:

In which months does most of your primary activity take place?

Chart 4.1 summarises the responses with the percentage of businesses reporting each month when their primary activity takes place. For example, 4% of holiday related waterway businesses report primary activity in February rising to over 90% for April to September. Even for non-holiday based waterway businesses there is clear seasonal skew. The impact of the coronavirus crisis has hit the sector just as it enters its busiest 6 month period.
CHART 4.1

4. Trading Between Waterway Businesses

Respondents were asked about their sales to other waterways based businesses. A substantial majority (63%) do not sell to other waterway businesses (especially holiday related businesses and surveyors). For a further 18%, sales to other waterway businesses is less than 10% of turnover.

TABLE 5.1

When it comes to buying from other waterways based businesses the picture is somewhat different. Although 28% do not buy at all, and 30% spend less than 10% of turnover with other waterway businesses, this leaves more than 40% buying from others.

TABLE 5.2

5. Actions Taken or Considered

Respondents were asked what action they have taken or are considering taking in response to the crisis. The results are summarised in the chart below. Key findings:

• A small number (11 or 4.5%) report having ceased trading permanently
• A further 11% are considering this option but more than half are quite clear that they will not
• Almost 60% have ceased trading temporarily
• Apart from a temporary cessation of trade the clear actions have been to reduce expenditure: whether by furloughing staff (45% of respondents), reducing marketing spend (just under 60%) or other expenditure (almost 75%)
• Of government support schemes furloughing is the most used, more than half have applied for or are considering applying for a grant, with similar numbers on VAT payment deferrals. A break from business rates is clearly not an option for many (either because they are in rate-able properties or do not otherwise meet the criteria -only 25% have applied for a break with a further 10% considering it) and there is perhaps a reluctance to take on loans under CBILS.

CHART 6.1

6. Selection of quotes from respondents’ additional comments

Figures in brackets is turnover for last financial year based on response to survey question)
 

“We employ 2 crew pretty much year round and 7 during the summer... all our guests are from overseas and we have at a minimum lost all April, May and June business... it is possible we will lose all our season.” (hotel boat operator, £500,000 to £1 million)
 

“We are unable to get any funding from the government for the small business grant scheme as we do not have business premises. We do however pay thousands of pounds for business licences and moorings… Our situation is desperate as we operate on a seasonal basis. We have very little income over winter (deposits only) and this season could see us losing up to approx 80% less than last with no income again for the coming winter.” (holiday hire boat operator, £75,000-£150,000)
 

“If the country opens up after the summer, we will have lost 100% of our revenue for the year.” (trip boat and small boat hire, £500,000 to £1 million)
 

“Had no answer yet to our business rates still being collected - £5K a month.  Worried if Furlough staff reimbursement will actually happen. If not, we will be bust by the end of August.” (marina operator, £500,000 to £1 million)
 

“Only 60% of our income comes from moorings, the rest is from passing trade and other trade to moorers. CRT have quite rightly told people not to cruise so this is hitting us hard - but they are still wanting us to pay 100% of our network access agreement which this year amounts to just over £37,000. We are unable to claim a government grant because our rateable value is too high.”  (marina operator, £500,000 to £1 million)
 

“Marinas have high rateable values but comparatively low turnovers and profits.  The £51,000 rateable value cap on the government grants is problematic and means we do not receive much needed help. As high capex businesses, further loans are not an option.” (marina operator, £150-£500,000)
 

“I am a boatbuilder who cannot deliver any boats and cannot sell boats because of the travel restrictions. My business rates are £800 per week and yet I do not get any help with this.  My rateable value is above £51000 and I am not considered to be in leisure or retail so I do not get any grants or business rate relief.” (boat builder, over £2 million)
 

“Can’t apply for a grant as we do not pay small business rates. Don't want to apply for a government loan as we will likely come out of the lock down into a period of limited people interaction and then go into our winter season where our ability to repay a loan will be limited due to a lack of income. Covid 19 is a placing yet more stress on our business as we have been unable to access the river since Nov 2019 due to flooding.” (training provider, £150-£500,000)
 

“We're a charity and a commercial events venue. Government support so far for both businesses and charities almost totally irrelevant to us. Following financial crash of 2008 and the austerity that came after, we responded by becoming more entrepreneurial so we became less reliant on grants by generating more of our own income to support our core charitable mission. What was a strength is now a weakness in this crisis as bookings are cancelled, deposits are refunded and enquiries have dried up completely. Support available has focused on immediate need - which is right - but we want to be here for what comes after: children will still be curious, there will still be a delight to be had in discovery and connection with the natural world of waterways and green spaces will be more important than ever. We'll need a hand to get us to the other side of this and that's what's missing currently.” (registered charity, £150-£500,000)
 

“This is massively effecting our business. We have been running it for 30 years now and carrying on traditional ways of working which could be lost if we lose everything.  Even if we make it through the summer there will be no back up to get us through the winter. It could be devastating for us.” (chandlery, £75,000-£150,000)
 

“It's impossible to plan ahead when your business is selling your products at large events and Festivals with no end in sight at present to the lockdown. Government is to slow to react with help and they really don’t support the small man in the street who lives from hand to mouth. June for some people is too late to support businesses.” (floating trader, Up to £75,000)
 

“I operate as a sole director limited company and as such fall through the cracks of much available support being unable to access support for sole traders as I pay myself through PAYE and unable to access funding for employees without furloughing myself and being unable to operate the business, something which is simply not viable at a time such as this when leads need to be chased in order to find work for when the lockdown is lifted.” (waterways maintenance contractor, Up to £75,000)