SNP finance chief Kate Forbes urged to step in as 20,000 small firms collapse during pandemic

In the 12 months from March 2020, an estimated 19,805 small companies shut their doors – around 5.4 per cent of the total.

The overwhelming majority (19,015) of those were firms not registered for VAT and/or PAYE, suggesting they were either self-employed people or new start businesses.

Hundreds of companies that were registered for VAT and PAYE also closed, with government figures showing 790 of these companies disappearing between March 2020 and 2021.

As a result, the FSB has now written to Scotland’s finance secretary Kate Forbes urging her to ensure the upcoming Budget will provide support to help the sector recover.

Andrew McRae, the organisation’s policy chairman said: “Almost 20,000 Scottish enterprises vanished over a single year of the Covid crisis. And the statistics suggest the bulk of these businesses were the very smallest operators, like self-employed individuals and new-start businesses.

“The stories behind these figures will all be different.

“But they’ll include the tour guide who had to get a job as he couldn’t run the business he loved while there were no tourists; or the migrant business owner who decided to return to their country of origin during the crisis and then never came back; and the person who ran the local café, but couldn’t make it turn a profit when faced with restrictions.”

He said that while restrictions were needed for public health, there was “no doubt they took a huge toll on local firms and the self-employed” and the government had a “duty to help these operators recover from the crisis.”

The FSB is one of several organisations calling for Ms Forbes to put their industries at the heart

of the economic review, while Labour is urging the finance chief to make tackling child poverty the crux of the spending plans.

She is to set out her Budget in Holyrood on Thursday.

READ MORE: SNP Finance Secretary Kate Forbes extends Covid business rates relief after backlash

In a letter sent to Ms Forbes, FSB Scotland has called for the current system of business rates relief, which will run until March 2022, to be extended for another year.

It has called for cash to be earmarked for grants to aid small businesses develop their digital skills, as well as reduce their impact on the environment.

Finally, the representative group has asked for Holyrood ministers to look at introducing a collective insurance scheme for people who are self-employed, similar to schemes already in place in Europe.

Mr McRae added: “What we need to see from the Scottish Government this week are commitments to help Scotland’s small business community get back on its feet.

“That means help for the current crop of businesses, and efforts to encourage and support the next generation of people who want to set up on their own.

“It is critical that Ministers support debt-laden firms by keeping in place Covid rates-relief for smaller firms for another financial year. And we want to see new grant funding to help local firms build their digital capabilities and reduce their carbon emissions."

The Scottish Conservatives have backed the FSB's calls, and described small companies as the "backbone of a strong economy".

Liz Smith MSP

Liz Smith, the party's shadow Finance Secretary, said: "The Scottish Conservatives are on the same page as [the FSB].

"In Thursday’s budget we are calling for a freeze on the poundage rate and a full year of 75% rates relief on leisure, hospitality, retail, aviation and newspaper sectors - saving Scotland’s businesses an estimated £600million.

“It’s heart-breaking to see the toll the pandemic has taken on small businesses, and it’s crucial that they are at the heart of our economic recovery from it.”

Meanwhile COSLA, the body which represents Scotland's councils, says local authorities need adequate support to ensure pandemic recovery does not stall.

Councillor Gail Macgregor, COSLA’s Resources spokeswoman said: "There are issues on the ground that will impact the pace of recovery. In addition to cuts to our core budgets over recent years, councils still experience restrictions around how and when funding can be used – with highly directed and restricted ‘pots’ of money. Councils want to provide services in a way that works for local people.

"This year’s Scottish Budget must provide fair funding and the flexibility so local government can lead local action to enable fast and effective recovery on behalf of us."

READ MORE: Scottish Child Payment to double to £20 a week

Scottish Labour has called on the SNP to put tackling child poverty at the heart of the spending plans this year, with demands to double the Scottish Child Payment again by 2023. Nicola Sturgeon announced at her party's conference last month that the payment would be increased, following pressure from campaigners.

Scottish Labour MSP Pam Duncan-Glancy said the change alone does not go far enough to meet child poverty targets.

She said: "Tackling the scale of child poverty in Scotland is the challenge of a generation.

“If we miss our statutory child poverty targets, not only will we be breaking Parliament’s commitment to do it, we’ll be catastrophically failing children across the country.

“Doubling the Scottish Child Payment this year is a crucial first step, but it won’t go far enough.

“The SNP must make sure the fight against poverty runs through every part of this budget, and pledge to build on this year’s increase by doubling the payment again to £40 per week by April 2023.

Scottish Parliament election count at the Emirates arena, Glasgow. Labour's Pam Duncan-Glancy who has become a Labour MSP on the Glasgow list.. Photograph by Colin Mearns.7 May 2021..

A Scottish Government spokeswoman said ministers were "determined that no one is left behind." during pandemic recovery, adding: "That’s why the budget will include initiatives to reduce inequalities and child poverty, support small businesses and economic recovery, as well as our focus on tackling the climate emergency as we deliver our program for government.

“This year’s Budget is expected to be challenging as a result of the continued pressure facing our public services, with substantial reductions to our funding from the UK Government, despite the continuing impacts of the pandemic.

“However, Scottish Ministers will ensure all investment is focused on helping people across the country.”