A general theme of the report by the Advisory Group on Economic Recovery (AGER) was the desire for Scottish Government (SG) to use its convening power as well as its intervening power on policy and financial matters. In particular, SG was urged to recognise that – as 80% of jobs in Scotland are in the private sector – a strong supportive, relationship with business is essential. Furthermore, since firms with less than 50 people account for over 98% of private sector businesses, the role of small business is crucial. A specific recommendation by AGER was that SG should convene a discussion with banks and other private sector investors to understand better how we can facilitate financing economic recovery.
I have chaired a small group of such banks, investors and CBI Scotland over the last couple of months. We have had a series of short meetings and syndicated work in parallel. The engagement from those involved has been open, transparent, and focused. We also commissioned extensive focus groups with businesses across the country, facilitated by CBI Scotland and the Federation of Small Businesses. This report sets out the principal conclusions. It is hoped that it will serve to set out the starting point, form the basis of a plan of advocacy, and provide a list of recommended actions that will propel the financing of economic recovery.
Since the beginning of the pandemic, the UK Government has made a number of interventions to support businesses and households. These steps have been essential, but we must also recognise the context and likely consequences. Given that so much of the economy experienced an emergency halt in March, the nature of financial interventions have been necessarily blunt and broad. The varying and enduring nature of the restrictions has led inexorably to the extension of such interventions.
The banks, in particular, have played an important role acting in concert with UK Government. But many businesses are in a period of suspended animation as the so-called ‘cliff-edge’ of dealing with – for so many – novel financial circumstances has been simply postponed. Increasingly we are also identifying businesses that will experience ‘long COVID’; that is, businesses that inherently have the capacity to thrive beyond this crisis but which will need to be nursed financially through a period of rehabilitation. The approach adopted by the banks to forbearance and recovery will be paramount.
It is vital that SG has a clear position, based in part on the specific characteristics of businesses in Scotland, to contribute to the framework developed by UK Government and the banks. We must also identify innovative ways in which we can act unilaterally to improve not only finance but also the accompanying support services. This is perhaps an opportunity too to tackle structural deficiencies such as the limited availability and use of venture capital finance in Scotland.
As a small advanced economy, we have the capability to act with greater agility than many others. In particular we must address the essential importance of collaboration as we plot our way forward. Our ambition for Scotland to create a robust, resilient wellbeing economy must not be thwarted.
The group that contributed to this report must be commended and thanked for their commitment, openness, and transparency. Needless to say it should not be assumed that all who participated would agree with every comment that is set out in this final report.