The latest Scottish Chambers of Commerce (SCC) Quarterly Economic Indicator (QEI) survey for Q2 of 2020 confirms the economic pain that has been felt by Scottish businesses across sectors in all parts of the country due to the Coronavirus (COVID-19) outbreak and the subsequent lockdown. The survey, conducted by Scottish Chambers of Commerce in partnership with the Fraser of Allander Institute, is Scotland’s longest-running economic survey of its kind.
Key highlights:
- On business confidence: Levels of confidence have fallen to historic lows in many of the sectors, with construction, retail & tourism most affected by the crisis
- On employment levels: Employment trends suggest the UK Government furlough scheme has been successful in limiting the scale of job losses. However, negative employment expectation levels highlight the long-term challenge for businesses to retain employees and protect jobs
- On cashflow levels: Cashflow – a key economic indicator of how a business is able to cover costs and report profits – has fallen to record lows for many sectors. In every sector, with the exception of manufacturing, the proportion of firms applying for credit is at the highest level since the question was introduced in 2014
- On business concerns and cost pressures: Many businesses will have had to rely on cash reserves and government support schemes to meet fixed costs, with overhead costs rising across all sectors.
Commenting on the results, Tim Allan, President of the Scottish Chambers of
Commerce, said:
“In many instances, these results are among the worst over the 30-year history of the survey. However, the circumstances of which they have arisen means that they should come as little surprise. COVID-19 has drastically halted or limited activity across all sectors of the Scottish and global economy.
“Our message to government is this: work productively with businesses in our shared aim of protecting jobs and local economies that may be lost forever if action is not taken now. Businesses are eager to do whatever they can to adapt to what will be a testing business environment; which will include changing workplace practises, dramatically evolving business models and re-skilling the workforce which will be critical across all sectors.
“It is critical that governments in Holyrood & Westminster continue to provide business support for companies during and beyond the easing of lockdown restrictions. A sudden end to these vital financial support measures would not be welcome by anyone and a tsunami of jobs would disappear overnight.
“Looking towards the future, governments must accelerate investment plans to fuel economic demand and activity as well as providing support for sectors to adapt to the new economy. This must go hand in hand with job guarantee and training schemes that ensure that we do not see a lost generation of talent.”
On the construction sector, Tim Allan said:
“The construction sector has been in shutdown – aside from essential projects – for the majority of the lockdown period and the re-opening plan for the sector has just come into play. More than half of firms are reporting and expecting declining investment for the next quarter. Perhaps the greatest challenge for the sector has been managing increased costs while demand has been either very low or zero. This has led to a significant decrease in workload and enquires for future work which will be of concern to those in the sector. The Scottish Government must take action to unlock a pipeline of future work to safeguard skills, experience and jobs in the building sector.’’
On the manufacturing sector, Tim Allan said:
“Some manufacturing businesses and outlets will likely have continued to operate in the lockdown period by contributing significantly to the public health response or supporting an essential service. Around half of firms in the survey have reported falls in orders and only around a quarter expect these trends to rise in Q3 with levels of increases and profits also at very low levels. The sector is being impacted by high cost pressures from raw material prices and other overhead costs, it will need support for these as it attempts to drive future demand.’’
On retail and wholesale, Tim Allan said:
“The retail sector has reported some of the lowest ever net balances recorded for the survey. Profit levels have plummeted and investment levels have collapsed with fewer than 10% of firms expected to increase investment and 70% expect levels to remain unchanged or fall in the next quarter. The major challenge for many of Scotland’s high streets and town centres is determining if the costs occurred to re-open safely will be supported by increased demand to make these businesses sustainable.
“The sector needs measures that will boost confidence and a temporary VAT cut by the Treasury will stimulate consumer demand.”
On tourism, Tim Allan said:
“The tourism and wider hospitality sector has suffered heavily, placing the sector into hibernation throughout the lockdown period. These issues as well as the increased costs firms will face to re-open safely, and reduced customers in any scenario, places the sector firmly in the danger zone.
“The UK Government must immediately reduce the rate of VAT on hospitality and tourism services including accommodation, food, beverages and visits to attractions to boost activity and consumer confidence.
“The current physical distancing guideline of 2 metres is having major implications on businesses to restart viably therefore an urgent decision from Scottish Government to reduce physical distancing from 2 metres to 1 metre is essential to support recovery.’’
On financial and business services, Tim Allan said:
“The sector is among the least depressed of the sectors, perhaps due to being the most equipped to operate remotely. However, at least half of respondents have reported falls in confidence, sales, investment, cashflow and profits. Like in other sectors, firms are reporting a sudden increase in overhead cost pressures and are fearful of rises in taxation.’’
Commenting on the results, Professor Graeme Roy, Director at the University of Strathclyde’s Fraser of Allander Institute, said:
“This latest survey from the Scottish Chambers of Commerce presents a sombre picture of the scale of the challenge now facing the Scottish economy.
“Across the board, confidence has plummeted, with a sharp fall in sales, turnover and investment across the business base. Chief amongst these was the unprecedented response from the tourism community, where a staggering – albeit not unsurprisingly – 95% of firms reported a fall in business confidence.
“What is particularly worrying is the employment outlook. The survey shows a clear warning of what is to come, with a sharp rise in unemployment now inevitable as businesses adjust to a new normal.
“The immediate priority for many businesses is survival.’’
The full report can be downloaded by clicking here.
Commenting on the Prime Minister’s speech today (30th June) in which he announced a ‘New Deal for Britain’, Dr Liz Cameron, Chief Executive of the Scottish Chambers of Commerce, said:
“The Scottish Chambers of Commerce agree that we must not let this crisis go to waste. Plans to rebuild our economy must be backed with both intent, collaboration and investment of a scale not seen since the last century.
“The Prime Minister set out a compelling case for investing in infrastructure and we urge both the Scottish & UK Government to work together to put shovel-ready projects on the table and deliver investment to ensure the economy is supported in the immediate, medium and long term.
“Boosting consumer confidence by announcing VAT cuts, providing further job security by extending the furlough scheme for the hardest-hit sectors and providing guaranteed opportunities for our young people are just some of the immediate steps both Governments should collaborate on and deliver for business. The Scottish Government must ensure all consequential funding is allocated towards rehabilitating the economy and creating jobs.”
Today The Independent publishes its annual Happy List, which this year honours 50 remarkable heroes in a crisis who have helped others during the Covid-19 pandemic. These are some of Britain’s most inspirational individuals, whose kindness, ingenuity and dedication prove that the worst of times can bring out our best. The List includes:
- Charandeep Singh, founder of The Sikh Food Bank which has distributed over 50,000 meals to people in need across Scotland. Charandeep is also the deputy chief executive of the Scottish Chambers of Commerce
- Captain Sir Tom Moore who raised more than £32 million for NHS charities by walking 100 laps of his garden before his 100th birthday
- Olivia Strong who created the Run for Heroes 5km challenge which has now raised over £5m for NHS charities
Charandeep Singh, founder of The Sikh Food Bank, said:
“To be recognised in the ‘Heroes in a Crisis’ List with so many inspiring individuals from across the UK is truly overwhelming. We have made it our mission to make sure families in need don’t go hungry during this crisis and since starting in March we have delivered over 50,000 meals. This recognition is dedicated to all our volunteers who stepped up to serve the most vulnerable in our communities across Scotland.”
Dr Liz Cameron OBE, Chief Executive, Scottish Chambers of Commerce, said:
“I have witnessed the immense acts of charity carried out by members of the Chambers of Commerce Network and I applaud the vital efforts of the business community to supporting people in need throughout this crisis. As well as our members, I have also been humbled by the volunteer efforts of Chambers of Commerce employees. Today’s publication is a resounding testament to Charandeep’s commitment to supporting and serving communities across Scotland which he has carried out on top of his day job. Congratulations to Charandeep and to all the inspirational individuals across the UK who are making a difference.”
Christian Broughton, editor of The Independent, said:
“In this time of such extraordinary turmoil, extraordinary characters have stepped up to make a difference. This year’s Happy List is devoted entirely to exactly these people – from carers who have risked their lives to save others, to fundraisers who have brought hope and comfort. We can’t possibly celebrate everyone who deserves credit, but those on this list deserve our recognition and our gratitude. Our thanks to them all – and to those who nominated such a broad and uplifting crowd.”
Following the success of the first round of its COVID-19 Support Scheme, funded by Dounreay Site Restoration Ltd (DSRL), the Caithness Business Fund is delighted to announce that it will be opening a second round thanks to a contribution of a further £100,000 from the Nuclear Decommissioning Authority (NDA).
The second round will once again make grants of up to £5,000 available to businesses within the Dounreay travel to work area to help with costs associated with reopening which can be clearly attributed to the COVID-19 crisis.
Due to a high level of expected demand, this funding round will be open from today (26 June) until 5pm on Tuesday 30 June. Applications will only be accepted via email, and anybody interested in applying should first view the initial guidance to ensure eligibility and then fill in a copy of the application form from caithnessbusinessfund.com/covid-19-support-scheme.
Trudy Morris, Chief Executive of Caithness Chamber of Commerce, which manages the Fund, said:
“The first round of this scheme was a huge success and I am delighted that we were able to support 55 businesses across the region through this. It was clear from the level of interest we saw that there was significantly more demand for support than we would be able to fund through DSRL’s initial contribution.
“We are extremely grateful to the NDA for recognising the challenges facing the local business community and for stepping up with an extremely generous contribution of a further £100,000. We have already been able to help a huge number of small businesses through this scheme and this contribution will significantly boost our capacity to support the local business community at a time when it is needed most.”
David Peattie, Chief Executive of the Nuclear Decommissioning Authority, said:
“The NDA is delighted to provide this additional funding support. This has been a difficult time for everyone, and we recognise the challenges faced by businesses as we enter this COVID-19 recovery period.
“Given the major impact of our work at Dounreay, we continue to work closely with our partners to do everything we can to support and protect the local economy”.
Commenting on the decision by the Bank of England’s Monetary Policy Committee to keep interest rates on hold and expand quantitative easing, Dr Liz Cameron, Chief Executive of the Scottish Chambers of Commerce, said:
“The Bank of England’s decision to significantly expand quantitative easing reflects the unprecedented impact of coronavirus on the UK economy. It is vital that the Bank works with financial institutions to ensure that it translates into on-the-ground support for businesses.
“The further loosening of monetary policy is welcome, but focus should remain on efforts that will help kickstart an economic recovery. This should include taking steps to close the remaining gaps in government support, including giving businesses direct incentives to invest, train and hire. Both the Scottish and UK Government need to pause any initiatives that add to the cost of doing business and review any policies that can reduce the cost of doing business. This is essential if businesses are to start building up much needed confidence.”
Responding to the First Minister’s statement in the Scottish Parliament today (18th June) on Scotland moving to Phase 2 of easing current lockdown measures as per the Scottish Government Roadmap, Dr Liz Cameron, Chief Executive of the Scottish Chambers of Commerce said:
“We welcome today’s further easing of some lockdown measures in Scotland. Many retailers will have some measure of relief to finally have a clearer idea of when they can re-open and what they will need to do to prepare for this while construction firms can now start working again. It will be a relief for many employers and will help to save jobs.
“Clearly current physical distancing limits at 2m is unsustainable for many businesses so we welcome the fact that this is being reviewed, with recommendations due within the next 2 weeks. We would suggest that the review be extended to consider the scientific evidence as adopted by many other countries together with the advice from the World Health Organisation. We all know that science can never be exact so it is important that a broader analysis and view is sought from others before final decisions are taken.
“There’s no doubt the challenges we face due to the global pandemic are extraordinary. But we need to move decisively and listen to the needs of employers as well as scientific advisors if we are to avoid permanent, long term economic collapse.’’
On the publication by the ONS of UK Labour Market statistics in the three months to April 2020, Dr Liz Cameron, Chief Executive of the Scottish Chambers of Commerce said:
“These unemployment figures are concerning but they only hint at the scale of the challenge that lies ahead. Protecting jobs must be a top priority. We continue to call on the Chancellor to provide a flexible approach to the furlough scheme in Scotland. This includes extending it further for the hardest hit sectors such as hospitality and tourism. These sectors are where there is greatest risk of a jobs crisis, which will disproportionately affect young people and the low paid.
“The huge decrease in vacancies shows the gulf in opportunity that is widening when it comes to jobs in retail, hotels and restaurants. As businesses eagerly await detail of the measures we require to enter Phase 2 of the Scottish Government’s road map, it is clear that the relaxation of the 2 metre distance to 1 metre will be essential to prevent wholesale economic collapse of these sectors and support business recovery.’’
Commenting on UK GDP statistics for April 2020, published today (12 June) by the ONS and funding announcements from the Scottish Government, Dr Liz Cameron, Chief Executive of the Scottish Chambers of Commerce said:
On the ONS stats
“The longer businesses in Scotland have to wait to open their doors and begin to trade, the worse the impact is going to be on jobs, livelihoods and communities across Scotland.
“This collapse in GDP leaves us in no doubt that our economy is in recession. Over the coming months, further action will be needed to limit the long-term economic damage and kickstart a recovery.”
On new funding announcements made by the Scottish Government
“The announcement of the £62million Energy Transition Fund and the £2 million Town Centres fund are positive steps.
“However, more must be done to close gaps in government support and providing incentives to help stimulate consumer demand and business investment. Establishing air bridges between countries with low infection rates would provide a much-needed boost to key parts of the Scottish economy.
“We now need to ensure the Scottish Government puts every resource at their disposal into helping to support businesses through this economic crisis.”
The Scottish Chambers of Commerce has joined forces with over 20 UK organisations including Tourism Alliance, UK Hospitality and Universities UK calling for the UK Government to set out as soon as possible an integrated cross-Government plan to open up the UK to our trading partners. The attached letter calls for the following:
- A framework for establishing travel corridors between the UK and low-risk countries to enable exemptions from the blanket quarantine requirements for UK arrivals. A clear set of risk-based criteria should be set out so that businesses can start to plan for a controlled re-opening.
- A timeline for returning to risk-based travel advice from the Foreign Office. The indefinite and indiscriminate advice not to travel overseas prevents businesses and individuals from being able to plan with confidence. Government advice should recognise that whilst Covid-19 has struck every corner of the world, it has not struck evenly.
- A comprehensive approach to health screening for arrivals into the UK to help control the virus over the coming months. Combined with the UK Government’s track and trace system, this could support the economic recovery by allowing a controlled lifting of restrictions on movement.