01 Jul 2020
By Stuart Patrick, Glasgow Chamber of Commerce Chief Executive
No city understands better than Glasgow the importance of offering jobs for the young as they leave education and join the workforce. Even after 40 years the collapse of the region’s heavy industries is still visible in persistent worklessness in many communities.
Far too many families lost in the turmoil simply didn’t share in Glasgow’s economic transformation. I know from the Chamber’s weekly meetings of our Glasgow Business Resilience Council that preventing another wave of youth unemployment is a priority.
The publication of the Higgins Report on Scotland’s economic recovery rightly recommends the creation of ‘a business-led Scottish Jobs Guarantee Scheme’ offering ‘secure employment for a period of at least two years to 16-25 year olds, paid at the Living Wage’. In normal circumstances, the majority of Scottish businesses would enthusiastically participate. But these are not normal circumstances and my greatest worry is that, far from increasing their recruitment, too many companies will have to cut jobs just to survive. The jobs that such a guarantee scheme depends upon may simply not be there.
The Higgins Report is well aware of that and has made helpful recommendations on business financing, including the possibility of taking ownership stakes, accelerating the Scottish National Investment Bank and a call for commercial banks to introduce new products to protect ‘viable and strategically important companies’. I’m not sure that quite captures the scale of the challenge. It’s not just a select few companies hammered by the crisis that must be protected, it’s the very bedrock of our company base that were told by government to close and who are now struggling.
TheCityUK, an industry-led body representing the financial and related professional services, recently produced its interim report on the recapitalisation needs of UK business following the Covid-19 crisis. Its work concentrates on the country’s 250,000 SMEs which together employ some 16 million people, estimating that by early next year these companies could be carrying as much as £50-60 billion of unsustainable loans - with property, accommodation and food services and construction especially vulnerable.
Add to this the very limited experience of SMEs in raising equity capital - £7bn per annum on average and mostly by London-based businesses - and the gap begins to crystallise. As much as a third of the government’s final tally of Covid-19 business lending could be unsustainable.
Given that analysis, the response will need to be large and varied. TheCityUK makes an impressive assessment of private funds that may be available, alongside the role the Government might play - and offers some early options from preference share capital through contingent tax liability schemes and conversion of loans to grants.
Work on designing these options continues and both the UK and Scottish Governments should be alert to its recommendations
Meanwhile both governments should be crafting a thoughtful but aggressive programme of business tax cuts and infrastructure spending.
Business rates were already a major problem for hospitality and high street retail. Rates for these sectors should be cancelled for two years and rateable values reviewed and reduced.
VAT reductions for hospitality and tourism are in the Higgins recommendations and should be pursued but the temporary easing of employment taxes should also be considered, and commitments to infrastructure investment previously made by the UK Government should be delivered at speed. The public health crisis is not over, and the reopening of the economy is only just beginning but efforts must begin now to prevent a new lost generation.
This article first appeared in Glasgow Chamber’s weekly column in The Herald newspaper on July 1.
