The income loss generated by the ELT (English Language Travel) sector could have a grave impact on Malta’s economy, a Deloitte study, published by The Federation of English Language Teaching Organisations Malta (FELTOM), has found.
Deloitte estimates net loss in economic activity could reach €88 million. Government revenue from the industry’s economic activity could also potentially decrease by 66%. This is 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,” FELTOM CEO James Perry said.
Deloitte strongly recommends 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. The wage supplement and fixed cost contribution support could range between €2m and €7.9m. It also recommends progressive support aimed to assist operators incurring more than 40% loss in arrivals and a re-investment of €13.5m target government revenue from the sector to stimulate accelerated recovery and over €100m 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 2 weeks or even subsidized flight with the local carrier.
FELTOM’s report was this week presented to the Tourism Minister during a high-level meeting as part of Government’s pre-budget consultation exercise.
An analysis of English Language Teaching Schools by Deloitte found that 1,378 jobs are on the line if the ELT industry is not sustained. The best-case scenario provided by Deloitte would still result in 643 people losing their jobs, unless government steps in.
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 and, given that the industry indirectly employs hundreds of host families and provides business to accommodation and transport providers, supermarkets and restaurants, the ripple effect on the economy is a substantial one.
Perry outlined how, as opposed to other tourism markets, this industry attracts people who would usually not travel to Malta. In fact, 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.
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.