More than half of Scottish firms planning redundancies once furlough ends

It came as HMRC statistics revealed businesses in the Highland, Perth and Kinross, Glasgow, South Ayrshire and Stirling council areas furloughed a larger share of workers than firms in other Scottish local authorities.

But the Federation of Small Businesses (FSB) in Scotland highlighted that between 23% and 34% of eligible workers were furloughed across every Scottish council area.

A total of 736,500 people were furloughed in Scotland, equivalent to around 30% of eligible workers. A similar proportion – 7,600,900 people – were furloughed in England.

Graeme Roy, director of the FAI, said the economic costs of the lockdown are "becoming ever clearer".  

He said: "This summer’s activity figures were the lowest since the survey began in 1998.  

"And whilst we find a marked improvement in business sentiment for the next six months, the finds are highly polarized with just as many firms expecting a further fall in activity as those expecting an increase.

“Around half of all firms in the survey intend to only operate at less than 75% of normal capacity over the next six months.

"As a result, and as the government Job Retention Scheme comes to an end, a similar proportion of firms – around 50% – who have used the JRS are planning to decrease staffing levels.

“In short, whilst the economic recovery has clearly started, it will be a long road ahead.”

The Business Monitor, drawn from more than 500 Scots businesses’ survey responses between June 30 and July 14, found 61% of firms believe their cash flow position is secure or very secure for the next six months – leaving a significant number at risk.

Many businesses have significantly increased their debt to get through the lockdown period, with 47% saying their burden has increased.

Of those, 41% have seen this increase by a large amount, 46% by a moderate amount and 13% by a small amount.

David Kirchin, head of Scotland at Addleshaw Goddard, said: “There is no doubt the economic outlook for the foreseeable future looks testing and, while activity levels are now improving, they remain challenged.

“However, there is encouragement to be found in the survey data. Nearly half of companies say they expect no change to their workforces and 61% of companies described their cashflow position as secure or very secure for the next six months."

Andrew McRae, FSB’s Scotland policy chair, said employers in big cities, small towns and rural areas alike have taken advantage of the UK Government’s furlough scheme.

He said: "Similarly, firms across the country have benefitted from the Scottish Government’s coronavirus support initiatives.

“While these lifeline schemes are imperfect – and we still look for policymakers to close gaps where they exist – they undoubtedly saved many firms and jobs during the difficult months of spring and summer 2020.

"But there is a long way to go and we are seeing a jobs crisis unfold before our eyes.

“After the last crash, nine in ten unemployed people that re-joined the workforce did so via a small business or through self-employment.

"We want governments in Edinburgh and London to give these operators the tools to play their part in the recovery."

He said this has been the worst year for smaller businesses in living memory and many operators "are running on fumes".

Yesterday, First Minister Nicola Sturgeon was asked if the Scottish Government is prepared for mass redundancies.

Speaking during her regular coronavirus briefing, she said: "We are preparing for what we consider to be reasonable consequences of what we are dealing with right now. I can't magic them away.

"I don't want lay-offs, I don't want redundancies, and we are spending as much time thinking about how we avoid and mitigate and support businesses through this process."

She said one way to avoid a "cliff edge of redundancies" is for the UK Government's furlough scheme "not to end prematurely".

Ms Sturgeon said many other countries have extended similar schemes beyond October.