English-language industry needs up to €7.9 million in government COVID-19 support

Government wage supplement and fixed cost contribution support for ELT schools could range between €2m and €7.9m, Deloitte study finds

A study conducted by Deloitte for the Federation of English Language Teaching Organisations Malta (FELTOM), found that a government wage supplement and fixed cost contribution support should range between €2 million and €7.9m for the ELT industry.

The report was this week presented to the Tourism Minister during a high-level meeting with FELTOM as part of the Maltese government’s pre-budget consultation exercise.

Deloitte strongly recommended the wage supplement to be sustained at a decreasing scale until business volume returns to 70% of what it had been before the COVID-19 pandemic.

It also recommended progressive support for operators incurring more than 40% loss in arrivals, and a re-investment of €13.5 million target government revenue to stimulate accelerated recovery, and over €100 million of economic activity. “Such stimulus could be through direct injection or also incentive schemes for the students themselves. Be they subsidized weeks of tuition when purchasing more than two weeks or even subsidized flight with the local carrier,” Deloitte said.

The ELT industry has always been a strong contributor to the Maltese economy. Deloitte estimates that total annual expenditure by ELT students stood at approximately €145 million in 2019. That year, the ELT sector accounted for 8.6% of total tourist guest nights, with 3% of all tourists being ELT students.

The ELT sector plays a key role in diversifying the tourism sector, indirectly employing hundreds of host families and providing business to accommodation and transport providers, supermarkets and restaurants.

FELTOM’s CEO James Perry said that, as opposed to other tourism markets, this industry attracts people who would usually not travel to Malta. Over half of ELT students (56%) were from non-EU/EEA countries in 2019. Although the highest number of students came from Italy (12% or 28,367 student weeks), this is followed by Colombia (9.1% or 21,688 student weeks) and Brazil (21,230 student weeks or 9%).

“The COVID-19 pandemic was an unprecedented shock on the local economy in general, but especially on the ELT industry where between the 5th and the 16th of last March, the number of cancellations by English language students increased from 4,000 to 20,000 – all in a span of two weeks. Cancellations kept increasing throughout the subsequent weeks,” Perry said.

Whereas July of 2019 saw a total of 18,457 student weeks, this year’s estimate stood at 9.4% of that amount which translates to 1,740 student weeks.

The study also looks at the financial impact of COVID-19 on the ELT sector. Business in 2020 plummeted by 80%. A decrease in industry revenue will also significantly impact accommodation, transport, and activities providers which account for 43% of the total industry variable costs.

“Government aid is crucial for the sector. Based on the scenarios provided by Deloitte, 1,378 jobs are on the line if the industry is not sustained. The best-case scenario provided by Deloitte would still result in 643 people losing their jobs, unless government steps in,” Perry said.

Deloitte estimated net loss in economic activity could reach €88 million. Government revenue from the industry’s economic activity could also potentially decrease by 66%, based on the VAT, income tax and NI generated by the industry. An analysis of the best-case scenario, a drop of 30% of students in arrivals, would mean that government generated revenue would drop to €15.2 million.

“The ELT sector is crucial to the tourism sector and to the country’s coffers. Sustained government aid is therefore of utmost importance for the sector. The industry will only start to recover once there are reduced health concerns and a substantial decrease in travel apprehension. This could still be a long way away,” Perry said.