This report builds on work earlier in the pandemic to evaluate the impact of the COVID-19 business support measures available in Scotland. The analysis presented in this report was carried out in autumn 2021 and considers measures introduced by both the Scottish and UK Governments up to summer 2021. It draws on scheme management information data available at that point, survey data, business intelligence from business representative organisations and enterprise agencies, as well as modelling work undertaken by the Scottish Government's (SG) Office of the Chief Economic Adviser (OCEA) to understand the outputs of the schemes (in terms of numbers of businesses and jobs supported) and early outcomes (in terms of the extent to which the measures introduced have helped businesses survive through the immediate crisis). Where possible, it assesses the distribution of scheme results by geography, sector of the economy, firm size and other socioeconomic characteristics to understand equalities issues and potential gaps in support. It considers the extent to which needs are being met by the current package of support and what measures could be considered as the COVID-19 situation evolves.
While the COVID-19 pandemic is first and foremost a health crisis, it has also significantly impacted businesses and the economy. The public health measures introduced to contain the spread of the virus necessitated the temporary closure of many businesses during multiple lockdown periods and require others to restrict or change how they operate. Many businesses that remained open also saw a fall in demand for their products, with significant impacts on their turnover and cash flows.
Scotland's output is estimated to have increased by 0.9% in May 2021, following increases of 1.6% in April, 2.6% in March and 1.5% in February, after falling by 3.1% in January 2021 and 0.6% in December 2020. At this time, there were still significant restrictions on economic activity as Scotland continued lockdown measures in response to a third wave of infection. Despite the increase in April, gross domestic product (GDP) remains 2.7% below the level in February last year when lockdown measures were introduced in March 2020. We have also seen a rising number of redundancies across sectors as businesses restructure to reopen in different market circumstances and some close due to failure. Below the aggregate data, impacts differ across sectors, reflecting their ability to trade during the pandemic. After output fell in nearly every industry during the first lockdown, the results for the subsequent lockdown periods and local restrictions are more mixed. Some parts of the economy are estimated to have seen a pickup in activity as firms and consumers adapted to physical distancing and some people returned to work. However, other industries across the services sector experienced further falls in output.
Given the pace and scale of the collapse in economic activity, the Scottish and UK Governments introduced a significant package of business support measures aimed at helping businesses to survive and maintain employment through the crisis. It should be noted that this 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.
Since the start of the pandemic the Scottish Government (SG) has allocated more than £3 billion to support businesses – more than a third of overall COVID-19 spend. This includes a package of measures from April 2020 in response to lockdown restrictions:
- package of rates relief and other NDR Income measures;
- schemes administered by local authorities such as the Small Business and Retail, Hospitality, and Leisure Grant funds;
- schemes administered by enterprise agencies such as the Pivotal Enterprise Resilience Fund (PERF) and Creative, Tourism and Hospitality funds;
- funds created to respond to evolving nature of the pandemic such as the COVID-19 Restrictions Fund and the Strategic Framework Business Fund;
- support to fill gaps such as the Newly Self-Employed Hardship Fund, Contingency Fund and Furlough Grant;
- other sector specific support.
There have been two periods of core grant operation in Scotland to date:
- Emergency period from April 2020 to October 2020.
- Strategic Framework Business Fund from October 2020 to April 2021.
This is in addition to support introduced by the UK Government (UKG) which was available to businesses in Scotland including:
- support for earnings for the employed (the Coronavirus Jobs Retention Scheme (CJRS) and the self-employed (Self Employed Income Support Scheme (SEISS);
- government-backed loans and finance agreements (Coronavirus Business Interruption Loan Scheme (CBILS), Coronavirus Large Business Interruption Loan Scheme (CLBILS) and the Bounce Back Loan Scheme (BBLS); and
- the deferral of payments of VAT and self-assessment income tax.
1.1 Aims and Objectives
In summer 2020, OCEA agreed with Ministers to have an ongoing programme of evaluation of Scottish Government COVID-19 business support; this began in June 2020. OCEA produced an evaluation report which covered early business support schemes in response to the first lockdown. Since the first version of this evaluation report, the COVID-19 context has evolved, with further restrictions introduced in October 2020, and another lockdown at start of 2021. These further restrictions were accompanied by additional business support schemes – taking the total business support to £3.7 billion as at June 2021 (more than £2.7 billion in grants and £965 million in non-domestic rates reliefs). Against this background, OCEA have produced this evaluation report to evaluate the impact of support offered up to summer 2021.
The aim of the programme of evaluation work is to assess the short, medium and longer-term outcomes of the business support package in Scotland and its impact on the Scottish economy. The overarching objectives are to:
- provide evidence on results achieved by the business support measures, including assessing the extent to which scheme objectives are being met. This will help policy thinking on how we adjust the support package as the COVID-19 context changes;
- provide evidence for communicating results achieved by the business support package as part of accounting for public resources;
- draw lessons for future business support measures. While the scope of the threat of COVID-19 to businesses and the economy is unprecedented, it provides an opportunity to learn lessons for future business support in response to large scale economic crisis.
The aim of this evaluation report is to provide an update to the initial evaluation of COVID-19 business support measures produced in summer 2020 to provide an early understanding of the impacts of support provided to date. The specific objectives of this report are to assess:
- uptake and reach of COVID business support provided by UK and Scottish Government (providing finalised data on closed schemes where possible and latest available data on open schemes)
- impact of business support on businesses in terms of financial impacts, business survival and protection of employment (and potentially on other aspects, e.g. on debt levels etc., where possible)
- additionality of SG business support above UKG support
- lessons learned from application processes and wider administration of SG support schemes.
The evaluation considers support measures that were available to businesses in Scotland up to summer 2021. It includes measures introduced by both the Scottish and UK Governments as outlined in Table 1 overleaf. Given the total number of schemes rolled up to support businesses in Scotland (approximately 90), a proportional approach has been taken to evaluate based on the scale of investment. This evaluation will focus on schemes that have closed – with the exception of CJRS and SEISS - and where level of investment (actual spend) is above £5 million (approximately 40). We propose that other schemes will be covered in further evaluation of the support package when the programme of business support has concluded. This proportional approach also minimises the burden placed on businesses at a time when many are still grappling with challenges arising from the pandemic and gearing up for recovery.
Table 1: Support Schemes in Scope of Evaluation
- Coronavirus Job Retention Scheme
- Self-employed Income Support Scheme
- Coronavirus Business Interruption Loan Scheme
- Coronavirus Large Business Interruption Loan Scheme
- Bounce Back loan scheme
- COVID Corporate Financing Facility
- Future Fund
- Eat Out to Help Out
- Business Support Fund Grants (Small Business Grant Scheme and Retail, Hospitality and Leisure Business Grant Scheme)
- Non-Domestic Rates Relief (100% Retail, Hospitality and Leisure / Airport & 1.6% Universal)
- Strategic Framework Business Fund
- Strategic Framework Business Fund Transition Payment and Restart Grant
- COVID-19 Localised Restrictions Fund
- Local Authority Discretionary Fund
- Hospitality, Retail and Leisure Top Up funds
- Newly Self-employed Hardship Fund
- Creative, Tourism and Hospitality Enterprises Hardship Fund
- Pivotal Enterprise Resilience Fund
- Island Equivalent Fund
- Mobile and Home Based Close Contact Services Fund
- Support for Small Accommodation Providers Paying Council Tax Fund
- Taxi and Private Hire Driver Support Fund
- Museums and Galleries Scotland Funds
- Scottish Wedding Industry Fund
- Events Industry Support Fund
- Visitor Attractions Support Fund
- Scotland Coach Operators COVID-19 Business Support and Continuity Fund
- Business contingency Fund Grants
- Culture Collective Fund
- Hardship Fund Creative Freelancers
- Cultural Organisations and Venues Recovery Fund
- Tour Operators Fund
- Pivotal Event Businesses Fund
- Scottish Wholesale Food and Drink Resilience Fund
- Performing Arts Venues Relief Fund
- Sea Fisheries Support Scheme
- Seafood Resilience Fund
- SME Liquidity Fund (House builders)
- Creative Scotland and Screen Scotland Bridging Bursary Funds
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