Impact of virus is 'stark'
Half of firms ‘can survive only until early summer’
Graeme Roy: ‘immediate consequences are stark’ (pic: Terry Murden)
Half of businesses in Scotland say they have only enough work to survive until the middle of June, according to a revealing new survey.
However, almost all those asked believe government measures to counter the impact of the coronavirus will help them to retain staff.
These are among the key findings from one of the first major surveys on the impact of the global health emergency on Scotland’s business community.
The Scottish Business Monitor, a survey of 500 businesses in the past week conducted by the Fraser of Allander Institute in conjunction with Addleshaw Goddard, provides an insight into companies’ survival prospects and preparations to rebuild.
It reflects unsurprising expectations of a severe downturn in volumes and prospects.
Half (51%) had shed staff because of the pandemic, while 81% said they have reduced the number of hours staff are working.
Re-starting our economy, when the time is right, will require careful thought– Graeme Roy, Fraser of Allander Institute
The pandemic has caused a sharp reversal in wage expectations. On average, the number expecting wages to rise has fallen from 72% in Q4 2019 to 27% in the current quarter.
Four in five businesses (80%) state that credit availability over the next three months will be very important or important, against 53% in the previous quarter. This is a reversal of a long-term trend seen over the last few years as credit availability has been less of an issue.
When asked how long businesses could survive under current levels of trading, of those who knew, 54% said less than three months while 32% said they could survive for four to six months.
Whilst these findings provide a stark indication of the shock the Scottish business community has felt in recent weeks, there is optimism that Government schemes will not only support businesses throughout the downturn but may also provide a platform for future economic recovery.
According to the report, more than 95% of businesses believe the ‘Coronavirus Job Retention Scheme’ being put in place will be very effective/effective in supporting their survival during the pandemic, suggesting businesses are – where possible – working hard to retain staff as much as possible rather than opting for redundancies.
Whilst there remain some teething issues with the various schemes, overall, they have been well received across the Scottish business community, and are recognised for the extraordinary and unprecedented measures they are.
Commenting on the findings, Graeme Roy, director of the Fraser of Allander Institute, said: “It is important to remember that the shutdown of all but essential activities in our economy is entirely the right response to the crisis both from a public health and long-term economic perspective. But the immediate consequences for individual firms and their employees are stark.
“The outlook for the next six months is the weakest we have seen since the survey began 22 years ago, with a sharp drop in employment and turnover.
There is no escaping the scale of the challenge over the coming weeks and months– David Kirchin, Addleshaw Goddard
“In time, and once we get through the public health emergency as safely as possible, we will need to turn our attention to rebuilding. Re-starting our economy, when the time is right, will require careful thought.
“Planning out how businesses can open-up once again, under what conditions, and at what capacity, will take time. Difficult decisions will be required about which sectors and businesses to prioritise.
“All of this should be done as a partnership between business their employees and policymakers, with public health advice paramount.”
David Kirchin, partner and head of corporate at Addleshaw Goddard in Scotland, said Covid-19 had “cast a temporary shadow over the overall outlook for business activity, investment and employment in Scotland, which last year was the highest it had been for six years”.
He added: “There is no escaping the scale of the challenge over the coming weeks and months and there is no single formula for every business to follow.
“But like any crisis, this one will end. Until then businesses grappling with cash-flow and other short-term issues would be advised to access the very substantial support from government and the wider business community to navigate these challenging times.”
Prior to the outbreak, the Scottish economy was moving in a positive direction with growth of 0.3% during the final quarter of 2019 and 0.7% over the year. The Fraser of Allander Institute this week said it could contract by as much as 25%.