Many firms shut up shop
Finance Secretary Kate Forbes has been urged to provide continued support after new data showed Scotland lost almost 20,000 small businesses in the first 12 months of the Covid crisis.
The number of registered firms between March 2020 and March 2021 fell by 19,805, a drop of 5.4%. There are now 344,505 enterprises in Scotland, the smallest number since 2014 when there were 329,765 businesses.
Most of the fall are not registered for VAT and/or PAYE – accounting for 19,015 of the total.
The Federation of Small Businesses said that this trend implies that the crisis has been particularly difficult for the self-employed and new start businesses.
Andrew McRae, FSB’s Scotland policy chairman, said: “The stories behind these figures will all be different. But they’ll include the tour guide who had to get a job as he couldn’t run the business he loved while there were no tourists. Or the migrant business owner who decided to return to their country of origin during the crisis and then never came back. And the person who ran the local café, but couldn’t make it turn a profit when faced with restrictions.
“While the public health measures that were taken were necessary, there’s no doubt that they took a huge toll on local firms and the self-employed. That’s why we believe that policymakers have a duty to help these operators recover from the crisis.”
In a letter to Ms Forbes ahead of the Scottish budget, the FSB urges the Government to earmark funds for grants to help Scottish small businesses build their digital skills and reduce their environmental impact.
“Further, the small business campaign group wants the Scottish Government to commit to another year of business rates relief for the businesses hit hardest by the covid crisis.
In addition, FSB has asked the Scottish Government to investigate a collective insurance scheme for the country’s self-employed, taking inspiration from similar initiatives on the continent.
Mr McRae said: “What we need to see from the Scottish Government this week are commitments to help Scotland’s small business community get back on its feet. That means help for the current crop of businesses, and efforts to encourage and support the next generation of people who want to set up on their own.
“It is critical that Ministers support debt-laden firms by keeping in place covid rates-relief for smaller firms for another financial year. And we want to see new grant funding to help local firms build their digital capabilities and reduce their carbon emissions.
“Further, we’re urging the Scottish Government to deliver bold new initiatives to build the resilience of our self-employed community.
“Independent businesses and the self-employed are part of the fabric of our local communities. But they’ve been stretched to breaking point by this crisis. Renewed help is urgently required from decision-makers in Edinburgh.”
The outlook for Scotland’s budget in 2022/23 will be challenging despite the Scottish government’s block grant being significantly higher than it was pre-pandemic, according to the Fraser of Allander Institute.
In its pre-budget report, the University of Strathclyde-based Institute says the continuing legacy of the pandemic on public services, together with a new set of election commitments, will continue to strain the Scottish budget next year, and become increasingly difficult by 2024/25.
The Scottish government’s core resource block grant will be £35bn in 2022/23, some 8% higher in real terms than it was in 2019/20. But it will be lower than in either of the past two years (2020/21 and 2021/22).