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Government schemes giving firms confidence of survival

Liz Cameron

Liz Cameron: ‘schemes are having an impact’ (pic: Terry Murden)

Further evidence has emerged that billions of pounds of government support is giving companies confidence that they can survive the lockdown.

While the vast majority of businesses in Scotland remain concerned about their prospects, companies say they are benefitting from access to a range of government support schemes, north and south of the border.

More than half of businesses (58%) surveyed by Scottish Chambers of Commerce said they would need a week or less to get back up and running under a partial or complete end of the lockdown.

Over one in five businesses (22%) said they face collapse in the next two months while 43% fear they won’t be able to survive if lock down conditions persist.

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These figures represent a small decrease in risk compared to previous survey data which found that catastrophic declines in income and cash caused by lock down conditions meant almost half (48%) of companies faced collapse in the upcoming quarter.

Liz Cameron, Chambers chief executive, said: “This survey shows that support from the range of schemes launched by both the Scottish and UK governments are having an impact.

“However, as well as need for guidelines there is still demand for continued support to ensure that businesses lead us out of this economic collapse as soon as conditions permit.”

New figures showed that the banking and finance industry has approved more than £22 billion in loans to over half a million (505,043) businesses so far through the three major government-backed lending schemes.

The positive mood was not shared by one financial adviser who said the UK government’s £500 million Future Fund opening for applications from innovative and high-growth businesses will benefit only a few companies.

Companies can apply for a convertible loan of between £125,000 and £5 million to support continued growth and innovation in sectors as diverse as technology, life sciences and the creative industries.

The government has made an initial £250 million available for investment through the scheme and will consider increasing this if needed.

Private investors – potentially including venture capital funds, angel investors and those backed by regional funds – will at least match the government investment in these companies.

The Future Fund is open to UK-based firms, that have previously raised at least £250,000 in equity investment from third parties in the last five years.

They will also need to have investors to provide funding to be matched by the government, and have half or more of their employees based in the UK or generate at least half of their revenue through UK sales. The loans will convert to equity if not repaid.

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David Hough, partner at Blick Rothenberg said: “Companies can apply for the fund from today but potentially only 50 companies can benefit as applications are processed on a first come first served basis. Companies can apply for up to £5million in matched funding until the Government’s commitment of £250m is fully utilised.”

He added: “Smaller companies and those in most need of support could be left behind and may find the pot has been fully utilised by the time they can get their matching lenders in place.” 

Mr Hough said: “More established companies are likely to be able to access the Future Fund more quickly as they will be able to show any historic fundraising that is required as part of the application and will have relationships with third party investors that they can utilise to secure the necessary matched funding. These businesses can act quickly and be first in line to take a share of the pot.”

He added: “Private matched funding will not be eligible for EIS relief and It’s disappointing that the Government did not allow this, and it does not seem clear why. There is a possible issue that the investment via this route will prevent future investments qualifying for EIS – the FAQs say previous investments will not be tainted but it’s silent on future investments.  This is another concern for investors.”

See also:

Retail sales collapse

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