The immediate financial consequences for a large number of businesses are stark, however, the swift government response to provide aid has been deemed to be effective

While the global coronavirus pandemic has had a deep and rapid impact on the Scottish economy, the unparalleled level of government support for businesses will be widely-used and deemed to be effective, according to one of the first major surveys of Scottish companies since the start of the global health emergency. 

The Addleshaw Goddard Scottish Business Monitor, produced in a partnership between the Fraser of Allander Institute and international law firm, Addleshaw Goddard, indicates a significant proportion of the Scottish business community has either already applied for, or intends to apply for, at least one of the Government’s five key support schemes. 

According to the Fraser of Allander Institute, while the large-scale shutdown of all-but-essential activities in the Scottish economy was an appropriate response to the global health crisis from a public health and long-term economic perspective, the immediate financial consequences for a large number of businesses across most sectors are stark.

However, the swift response from the government to provide significant aid to the business community and its employees has, in the main, been deemed to be effective although concern was expressed about the delivery of the various schemes

The detailed results from the Scottish Business Monitor, drawn from nearly 500 Scottish-based businesses’ survey responses between 1st April and 8th April, indicate:

• By far the most popular support mechanism for businesses is the Job Retention Scheme, with near to 90% of businesses surveyed either already adopting the scheme or planning to do so. The £25k grant for hospitality, leisure and retails properties with a rateable value of £18-51k, is the second most popular
• Of those planning to use the government policies, 90% expect the support to be very effective or effective to the survival of their business
• For those who intend to use the Job Retention Scheme, the vast majority intend to furlough more than half of their staff (at least 76% of respondents intend to furlough near 60% of their staff)
• The Job Retention Scheme is perceived to be the most effective to aid a business’ survival with 95% of respondents saying it will be effective or very effective
• When asked how easy it has been to access government support, most respondents deemed the schemes difficult to access (near 60% for CBILS and over 40% for the Job Retention scheme). However, it is important to note that early teething problems, which were to be expected due to the government’s rapid response, are now being overcome
• At this stage, respondents indicated that they would be less likely to access, or found it more difficult to access, the coronavirus business interruption loan scheme (CBILS), £10k grants for SMEs and full year 100% non-domestic rates relief for retail, hospitality and tourism companies. However, as access becomes more refined for each scheme, pick up is expected to increase over the coming weeks and months. In particular since the survey was undertaken a number of new lenders have been accredited to participate in CBILS, the rules for accessing CBILS have been loosened and greater clarity has been provided by the British Business Bank which oversees the scheme on its eligibility criteria.  Additional lending under a new scheme aimed at businesses with an annual turnover of over £45m will soon be available 

Commenting on the findings, Graeme Roy, Director of the Fraser of Allander Institute, said: 

“Our survey finds that businesses are supportive – in principle – of many of the measures announced by Government, and there is a view that they will help the survival of many businesses. In particular, accommodation and food services and construction industry have indicated that the Job Retention Scheme will be key to them surviving to the other side of this crisis. However, time will tell how easy these schemes are to access, who is falling through the cracks, and the degree to which they are sufficient to help business through this unprecedented time. Going forward it will be important to monitor how these schemes operate in practice. Businesses too will also want a roadmap out of this crisis period, which will include the timing of these policy measures being unwound and future guidance on social distancing and re-starting the economy." 

David Hughes, a partner in Addleshaw Goddard’s Scottish employment team, said: 

“The government's Job Retention Scheme was an important and swift step to avert the potential for mass redundancies and as a short term measure the scheme has certainly been popular and will have provided many businesses with critical breathing space, particular in the run-up to the April pay run. But with half of all employers taking advantage or about to, many will be hoping that the social distancing restrictions can be lifted before the treasury runs out of money to fund it. There is of course no sign when that will be and conversations we are having with businesses are increasingly turning to longer term options and what happens post furlough.”

Gaenor Cassell, a partner in Addleshaw Goddard’s Scottish corporate lending and borrowing team, said: 

“As the response to COVID-19 continues to develop day-by-day, there remain some issues to be worked through in relation to how some of the emergency funding schemes can be accessed, how they will operate in practice and how quickly funds can be made available. Against the backdrop of significant challenges, the British Business Bank and the accredited scheme lenders have reacted quickly to try and deal with these issues.  It is clear however that businesses continue to be in desperate need of cash and there is an undeniable link between the success of the emergency funding measures and the ability of businesses to recover from the impact of the lockdown restrictions once they are lifted.  It is therefore vital that where obstacles to accessing emergency funding remain, changes are quickly made to allow these to be overcome."