Scottish business confidence crashed in the final days of 2020 before further coronavirus restrictions and another lockdown were even on the horizon, according to new research.
The Federation of Small Businesses’ (FSB) UK-wide small business confidence index fell to minus 49.3 points between December 14 and 21 last year, the second-lowest ever recorded by the research series.
However, the equivalent Scottish figure – based on whether businesses believe trading conditions are going to improve or deteriorate – plunged to minus 69 points from minus 26.3 points in the autumn.
Andrew McRae, FSB Scotland policy chairman, said: “This is likely due to our proportionally larger tourism and hospitality sector, as well as the restrictions Scottish firms faced when this survey was conducted.
“The average Scottish business owner has grave fears about the future… worries are founded upon firms facing weeks or months of restrictions after likely draining their cash reserves and taking on significant debt.
“That’s why governments in Edinburgh and London need to back our small businesses and those that work for themselves.
“We need to see the Chancellor expand help to company directors and boost the overall package of support to UK small businesses. This move must take place before the March budget.
“The Scottish Government too must turn warm words into hard cash for smaller firms – that means quickly providing easy-to-access cash grants for all Scottish smaller businesses hit by this crisis, no matter their sector or status.
“It remains far too difficult for many firms to access the financial help that might be the difference between their survival and failure.”
Both indices only recorded lower figures in the first quarter of 2020 – around the time of the first lockdown as a result of Covid-19 – with the UK index at minus 143.4 points and the Scottish index again lower at minus 154.8 points.
The group also suggests around one in five (21.5%) of Scottish small businesses fear facing having to reduce their workforce in the next three months while less than one in 20 (4.8%) intend to expand.
Nearly 5% of the 1,400 UK firms surveyed as part of the index suggested they plan to close their doors in 2021 with the FSB warning this could lead to a quarter of a million business failures.
Mr McRae added: “A million people in Scotland are either employed by Scotland’s local and independent firms or work for themselves. But our neighbourhood entrepreneurs are in crisis.
“Despite making huge sacrifices during this pandemic, local businesses aren’t getting sufficient support from policymakers.
“This needs to change and fast otherwise we’ll see wave after wave of job losses and business failures.”
After the figures were published on Monday, the Scottish Government announced a top up to grant support available for hospitality, retail and leisure businesses closed by Level 4 restrictions across Scotland.
Eligible smaller businesses in these sectors can receive a one-off grant of £6,000 on top of the four-weekly £2,000 payments.
Meanwhile £25,000 will be available for larger hospitality business and £9,000 for larger retail and leisure businesses on top of their four-weekly £3,000 sums.
Finance Secretary Kate Forbes said: “This additional support for hospitality, retail and leisure businesses will be available this month, in some cases doubling or tripling the amount of support we are providing.
“Applications are open now and payment will be made this month.
“I’d encourage all eligible businesses to apply through their local authority if they have not done so already.
“Of course we are acutely aware that this support can never compensate for the full impact on business, but we must work within the resources that are available to us, and we continue to respond to the evolving economic challenges arising from the pandemic.”
David Lonsdale, Scottish Retail Consortium director, said: “Shops and high streets across Scotland have been left reeling by coronavirus.
“These enhanced cash grants for retail business are a financial lifeline which will help non-essential stores through the current phase of being unable to open and trade.
“There isn’t a taxpayer-funded support scheme which can replace the potential losses of store closures, so it is very encouraging that the Finance Secretary has listened and responded positively.”
In response to the latest announcement, Mr McRae added: “It is good to see the Scottish Government increase the size of the grants that are available. This should help some smaller Scottish businesses weather the current storm for a bit longer.
“We’d urge all eligible independent businesses facing difficulties to apply for this help, or we face chains and larger operators swallowing up the bulk of the funding.
“The Scottish Government still has work to do to get previously announced support schemes up and running.
“And we must see help reach those that have had little or nothing so far, like many home-based businesses. Ministers must strive to make vital help easier to access and understand.”
A UK Government spokeswoman said: “The UK Government is doing everything it can to support businesses and employees across Scotland.
“We’ve already extended the furlough scheme until April, providing certainty for businesses as they navigate the months ahead.
“And we have provided the Scottish Government with an additional £8.6 billion this year to help them to respond to the pandemic. The Scottish Government is free to use the extra funding to provide additional support for businesses as we have in England.”