Three quarters of Scottish firms fear collapsing within six months

Three-quarters of Scots firms fear they could go to the wall in the next six months if the Covid-19 lockdown remains in place, a survey of businesses show.

By Scott Macnab Friday, 10th April 2020, 6:00 am

The scale of the crisis facing the economy has seen companies record their worst ever outlook for the months ahead, according the latest Fraser of Allander Institute business monitor.

There are now calls for the Scottish Government to extend the support measures in place for firms which are bearing the brunt of the downturn which has seen all but essential economic activity halted.

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Almost 500 companies took part in the Strathclyde University-based think tank’s survey.

An empty Princes Street during the coronavirus lockdown

When asked how long they could survive under current trading conditions, 54 per cent said less than three months, while a further 32 per cent said they could survive for four to six months. There was a response rate of 90 per cent in this section, meaning 77 per cent fear they won’t survive beyond September

The survey also found the outlook for the next six month is the bleakest since the monitor started in 1998.

The report states: “We are clearly in unprecedented times. The public health crisis has hit the global economy and caused huge disruption.

“Our survey picks up the scale of the shutdown. It is extraordinary, with the lowest forecast for future activity amongst businesses that we have seen since the survey was first launched nearly 22 years ago.”

The survey finds one out of every ten (89 per cent) businesses have seen turnover impacted since the beginning of March by the coronavirus.

More than half (51 per cent) have cut staff due to the pandemic, the survey finds, while 81 per cent said they have reduced the number of hours staff are working.

More than a third (36 per cent) said that their businesses supplies had been “impacted a lot”, with a further 45 per cent saying they had been “impacted a little”.

And almost two-thirds (63 per cent) of businesses saw their cash flow “impacted a lot”, with a further 26 per cent seeing it ‘impacted a little’.

Andrew McRae of the Federation of Small Businesses (Scotland) said the downbeat outlook was “unsurprising” after the lockdown of all economic activity.

But he said: “The worst predictions about our economy won’t come to pass if government at all levels gives as many firms as possible enough support to survive this crisis.

“That’s why we’ve written to the Scottish Government asking for a new package of help for businesses and the self-employed excluded from existing help, and for those that believe the package on offer is insufficient.

“While the priority has rightly been to get money out the door to local businesses, now’s the time for decision-makers to refine and fine tune the package on offer.”

More than 95 per cent of businesses who expressed interest in applying believe thecoronavirus job retention scheme being put in place has the potential to be very effective or effective in supporting their survival.

But 85 per cent of businesses expect growth in the Scottish economy to be weak or very weak over the next 12 months.

The net number of firms expecting an increase in their volume of business over the next six months has dropped significantly, with the outlook being the most negative since the survey began in 1998, with 10 per cent expecting a rise in business, and 80 per cent expecting a fall.

The situation is particularly stark in the accommodation and food, manufacturing, and retail and wholesale sectors.

Tory finance spokesman Donald Cameron said: “Given the unprecedented times we’re living through, it’s perhaps unsurprising that so many businesses are pessimistic about the future.

“That’s why it’s more vital than ever that the Scottish Government gets its support packages right.

“Too many firms are concerned that the SNP’s approach is not offering the equivalent support as the UK government, and that could seriously harm jobs and growth north of the border.”

The Tories have raised concerns over the disparity in emergency support grants for small and medium businesses in Scotland compared to elsewhere in the UK. The UK government is paying a £25,000 grant per property, whereas the Scottish Government are releasing only £25,000 per business, irrespective of the number of premises.

But Nicola Sturgeon said yesterday: “We’re thinking carefully about the support we give to businesses.

“So every single penny of the consequential funding coming from the UK government will be passed on to businesses.

“We have designed this support in a way that allows more businesses to benefit.”

She insisted some support in Scotland is not available south of the Border on grant funding, support with water charges and for particular sectors like the seafood, bus and creative industries.