17 Jun 2020
By Stuart Patrick, Glasgow Chamber of Commerce Chief Executive
FROM the very beginning of the Covid-19 crisis we have been hearing concerns from manufacturing and construction companies that the Scottish lockdown was more severe than in the rest of the UK.
I recall being told firmly by a senior Scottish Government civil servant that we had to recognise this is, first and foremost, a public health crisis. Economic issues had to be secondary considerations. There is no doubt that stance has been publicly popular to date.
This week the emphasis took a notable shift, with the economic crisis now acknowledged by First Minister Nicola Sturgeon. April UK output figures from the Office of National Statistics confirmed a record busting but unsurprising 20 per cent drop, and Cabinet Secretary for Finance Kate Forbes went so far as to say she felt it possible the Scottish economic position was worse.
Our own evidence would suggest it is. Across the UK, Chambers of Commerce have been reporting average falls in issuing trade certificates for exports of 20% to 25%, while Glasgow Chamber’s figures fell over 50% as soon as the Scottish lockdown was announced and have stayed that way throughout.
The First Minister has now called on the Chancellor to extend the job retention scheme (JRS), quoting France as the benchmark. French Labour Minister Muriel Penicaud announced last week that a long-term part-time support scheme could last as much as a year or two, with details yet to be clarified.
I hope the First Minister’s demand is backed by genuine negotiation with the UK Government. My own soundings with the British Chambers of Commerce suggest it is very unlikely the Chancellor will extend the JRS just for Scotland, but perhaps there are proposals that could be productive.
There is surely merit in continuing some form of JRS for those sectors that will find it near impossible to trade under social distancing rules. An average restaurant makes a profit of around 3% to 5%, too tight a margin to cope with the reduction in capacity current social distancing requires. Reducing the two metre requirement to one metre would certainly help some businesses and that is a decision the Scottish Government can make on its own.
The impact would not just be on the hospitality and tourism industries but also on construction and manufacturing where the effect of the two metre rule on productivity will not be pretty.
However the First Minister essentially dismissed that out of hand. She is correct in arguing a second lockdown from a second wave would be even more disastrous economically, but given the scale of the impact we surely cannot be considering another national lockdown as a credible option.
Should the Scottish Government not be focusing on getting the Test and Protect system fully in place so that any future lockdown is locally targeted, as we are now seeing in Beijing? It would then be a fair question to ask of the Treasury what support will be in place for businesses caught up in localised lockdowns.
We are also told repeatedly that the Scottish Government has spent £2.3 billion on the economy to demonstrate its commitment. Much of that spending is on the grants being fed through to small companies from decisions made at the UK level by the Chancellor. That is very welcome and necessary spending.
However our survey work told us in April that as many as two thirds of companies only had cash reserves sufficient to last three months. The bulk of the £2.3bn will have been swallowed up just keeping companies afloat for those three months.The economy will need to open up soon or that money will have been wasted.
This article first appeared in Glasgow Chamber’s weekly column in the Herald newspaper on June 17
