20,000 Scottish businesses vanished during year of crisis

Scotland lost almost 20,000 small businesses during a single year of the covid crisis, according to official statistics.

As a consequence of this dramatic fall in business numbers, the Federation of Small Businesses (FSB) is urging the Scottish Government to outline new measures to aid the recovery of local businesses in the budget next week.

According to the Businesses in Scotland statistical release between March 2020 and March 2021 the estimated number of businesses in Scotland fell by 19,805, a drop of 5.4 per cent. There are now 344,505 enterprises in Scotland, the smallest number since 2014 when there were 329,765 businesses.

The bulk of the fall in business numbers is amongst unregistered Scottish businesses (those not registered for VAT and/or PAYE) accounting for 19,015 of the decline. FSB says that this trend implies that the crisis has been particularly difficult for the self-employed and new start businesses. However, Scotland also saw a decline in registered businesses over the same period, with 790 of these firms lost.

Andrew McRae, FSB’s Scotland policy chair, 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.

“While the public health measures that were taken were necessary, there’s no doubt that they took a huge toll on local firms and the self-employed. That’s why we believe that policymakers have a duty to help these operators recover from the crisis.”

In a letter to Finance Secretary Kate Forbes about the budget, FSB urges the Scottish Government to earmark funds for grants to help Scottish small businesses build their digital skills and reduce their environmental impact. Further, the small business campaign group wants the Scottish Government to commit to another year of business rates relief for the businesses hit hardest by the covid crisis.

In addition, FSB has asked the Scottish Government to investigate a collective insurance scheme for the country’s self-employed, taking inspiration from similar initiatives on the continent.

Andrew McRae said: “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. Further, we’re urging the Scottish Government to deliver bold new initiatives to build the resilience of our self-employed community.

“Independent businesses and the self-employed are part of the fabric of our local communities. But they’ve been stretched to breaking point by this crisis. Renewed help is urgently required from decision-makers in Edinburgh.”