Coronavirus (COVID-19) business support measures: evaluation

5. Conclusions

This report has brought together evidence from scheme management information data, survey data, business intelligence and modelling work to provide an early stage evaluation of the initial impact of the business support schemes available to businesses in Scotland.

It has shown that the package of support provided by the Scottish and UK Governments has provided lifeline support to businesses during lockdown, helping most businesses survive up to this point. However, the viability analysis suggests levels of support have not been sufficient to offset losses across many sectors, increasing likelihood of business closures and redundancies as businesses struggle to cope with financial pressures resulting from the pandemic. It should be noted that the package of support was not intended to fully compensate businesses for any losses they faced as a result of the pandemic or the restrictions that have been in place to control the spread of the virus.

As was concluded from feedback in 2020, grant support continues to have been a more popular means of helping businesses to cope with the impact of COVID-19 in the short- and longer term. Many businesses were worried about the consequences of receiving UK Government backed loans because of concerns about the long term impact of debt overhang, however the share of businesses receiving loan support has steadily increased. This perhaps implies that businesses were more willing to take on debt to ease increasing financial pressures as restrictions continued into 2021.

The report shows that while the UK Government's Coronavirus Job Retention Scheme (CJRS) has had the greatest reach and possibly impact, the support provided by the Scottish Government, which focussed on small businesses and sectors most impacted by lockdown, has provided complementary support, filling many gaps in UK Government Schemes. As a result, the Scottish Government schemes have had an 'additional' impact on business survival over and above the UK Government schemes.

The report has demonstrated that businesses were broadly happy with the support provided but that there were some perceived shortcomings in the application and processing of the Scottish Government schemes that were still being experienced.

While the restart of the economy is expected to continue to improve business activity, the viability analysis carried by OCEA for this evaluation suggests a number of businesses could require ongoing support beyond duration of key schemes like the CJRS if restrictions remain in place or demand returns more slowly. As the support package unwinds with the loosening of restrictions in summer 2021, businesses' viability is mostly reliant now on the rebounding of the economy and consumer demand. Early indicators are pointing to a recovery in both Scotland and the UK, however sectoral differences are expected to remain in the near future as businesses in the most affected sectors deal with issues such as reduced savings and debt.