Shortage occupation list 2020: call for evidence - our response

Impact of COVID-19 on Businesses

429. The latest OECD Economic Outlook describes the world as being on a 'tightrope': even if a second wave of the COVID-19 pandemic is avoided, global economic output will fall by 6% in 2020. A second wave could further decrease this to 7.6%.

430. The OECD predict that the UK could be one of the worst hit economies, with output down by 11.5% in the 'single hit' scenario; by 14% with a double hit.

431. The significant contribution to the economy of trade, tourism, real estate and hospitality, all of which were badly hit by lockdown measures, is a key contributor in leading to this heavy affect.

432. Notably, all of these employ high numbers of EU citizens and a low skills level.

433. It will take many years to return to pre COVID-19 GDP levels.

434. On 1 May 2020, Scottish Chambers of Commerce published a COVID-19 tracker survey^[142] of just over 350 companies in Scotland. Notable findings include:

• 48% of companies say current cashflow will only cover them for a period of up to, or less than, 3 months
• 13% say they had less than a month before cash ran out
• 64% believe that there are gaps in the current business support measures offered by government
• 50% have already - or intended to - furlough at least half of their staff or more - with 19% of those intending to furlough all of their staff

435. This survey shows that even in April (fieldwork was carried out from 14 to 24 April), when lockdown was in its very initial stages, Scottish businesses faced a catastrophic decline in cashflow due to the impact of the COVID-19 pandemic.

436. Notably, 96% of the respondents were SMEs with workforces of less than 250 employees. The highest trend was of companies with a maximum of 9 employees, making up 42% of responses. 13% were sole traders.

437. The most recent ONS Business Impact of COVID-19 Survey (BICS) data shows there has been little to no change in business indicators over the last few months. Particularly concerning is the a high percentage (over 25%) of businesses in Scotland who 'don't know' their status of reserves.^[143]

438. SMEs in Scotland are most likely to have hired workers from the EU and not be a registered Tier 2 employer, given the costs and bureaucracy associated with this route and their lack of centralised HR function. Therefore it will be SMEs who are most severely impacted by this new system.

439. More recent research carried out by the Federation of Small Businesses (FSB) explored the impact of the crisis on small firms in particular. The report, Finding Our Feet,^[144] found:

• around three quarters of businesses had furloughed staff
• more businesses in Scotland have closed compared to the UK as a whole
• 1 in 5 are selling assets and are struggling to pay commercial mortgages/rent payments

440. Sectors that were particularly badly affected include Accommodation & Food (-88% in economic output); Construction (-40%) and Arts & Entertainment (-40%).

Economic Impacts of COVID-19 on Health and Social Care

441. The UK Government's Regulatory Policy Committee advises that:

"The Coronavirus pandemic is likely to have significant long-lasting effects on the UK economy and the impacts of many new regulations. The RPC would therefore expect that future Impact Assessments, including those supporting the secondary legislation that will follow this Bill, will start to consider the impacts of any absolute and structural changes to the economy when updating or setting out regulatory policy proposals."

442. The UK Government predicts a "cumulative fiscal cost, estimated at between £1 billion and £3 billion over the first five years" from the UK Government's Immigration Bill. This represents a significant and unnecessary economic cost, and one that may yet have impacts on Health and Social Care budgets.