Island business resilience fund: island communities impact assessment (December 2025)

4. Assessment

This revised assessment continues to demonstrate distinct impacts on island communities because of sustained ferry disruption. This includes risks to the local economic stability of the most impacted islands - particularly in relation to the visitor economy and perishable goods sector.

The stakeholder engagement sessions reinforced that ferry disruption is a systematic challenge. Participants described disruption as chronic rather than occasional, encompassing not only cancellations but also reduced capacity when larger vessels are replaced by smaller vessels, missed connections and frequent timetable changes. These factors collectively undermine confidence in the transport network, creating reputational damage that persists after services resume.

Economic impacts were also highlighted across multiple sectors. Tourism businesses highlighted shortened seasons, lost income and cancellations that wipe out projected revenue, while retail and haulage firms face increased costs from re-routing and overnight stays. Beyond financial strain, stakeholders noted significant mental health pressures on business owners and contractors, alongside depopulation risks as families and skilled workers relocate because of unreliable connectivity.

Participants stressed that ferry reliability is fundamental to island viability and called for long term investment in addition to short term support.

HIE analysis concluded that these are the most impacted sectors. The reasons for this are outlined in the following paragraphs.

• Visitor Economy

Tourism is a major driver across island economies and is key to supporting the year-round viability of hotels, restaurants and visitor attractions. When ferry services are disrupted, these organisations suffer more acutely than other sectors in terms of reduced footfall and revenue. HIE have confirmed that the sector believe they face long-term impacts through the loss of confidence in the ferry network. The ‘Socio-economic impact of CalMac ferry services: ‘Phase 2 Report by the Centre for Economics and Business Research (2022)’ also underlines the importance that tourism has as a key economic driver for islands served by the ferry network.

• Perishable Goods

The perishable goods sector is directly impacted by supply chain disruption, with the inability to move products leading to rapid deterioration of goods and loss of income. In addition to shorter shelf lives there are wider knock on effects – including reduced confidence in island food producers and increased costs for hauliers, which may have been passed onto both businesses and consumers.

Reflecting on the feedback from stakeholder engagement and consultation events, it was judged that extending the scheme to further islands, whilst retaining the sectoral focus/eligibility, remained appropriate for the purposes of the IBRF. The wider issues which were raised are being taken forward through ferry upgrades and other Scottish Government interventions

Scope

As outlined above; to further maximise the impact of the remaining funding available, the IBRF has been expanded to support a second cohort of islands and sectors most impacted by disruption comprising of:

• Coll
• Tiree
• The Small Isles (Eigg, Muck, Rum and Canna)
• Barra
• Vatersay
• Islay
• Jura
• Mull
• Iona
• Ulva

Targeting both direct and indirect impacts ensures the IBRF reflects the realities of ferry disruption across the network and provides proportionate support to the businesses most affected.

Acknowledging the significant financial pressures on the Scottish Government, it is not possible to provide funding in response to all disruption. However, the second cohort of funding allows the islands above to fall into the expanded scope and become eligible for support.

The IBRF is a direct mitigation, designed to support island-based businesses on islands that have been the most affected by ferry disruption. Additionally, the Fund has been developed with input from HIE, helping to ensure maximum impact.

Ongoing engagement with stakeholders will continue to help monitor the IBRF’s effectiveness and identify any further support needs.

Eligibility criteria^[1]

The eligibility will remain consistent with the first round of funding, focusing on the sectors most impacted by ferry disruption, based on evidence from HIE and previous engagement with stakeholders. These are visitor economy businesses such as cafés, accommodation providers and tour guides, as well as businesses involved in the perishable food and drink sector.

The IBRF is open to small and medium businesses, including sole traders and micro-enterprises. While grant levels are linked to the number of permanent island-based employees - to reflect economic and social impact (please see the following paragraph), smaller businesses remain fully eligible for support.

We have made efforts to ensure the application process is as simple and accessible as possible, particularly for smaller businesses who may have limited capacity.

Please note that full eligibility criteria and sector definitions are set out in the Islands Business Resilience Fund guidance.

Level of funding

The IBRF is intended to support ongoing business resilience and island employment. The level of awards to a business will therefore vary according to the number of permanent employees working on the island. Businesses that incur higher wage bills - because they employ more people (and thereby create greater economic and social impact), will be awarded higher grants within the parameters of the Fund.

Is a full Island Communities Impact Assessment required?

Yes. The evidence clearly demonstrates that some islands are experiencing disproportionately high levels of ferry disruption. This means that some island-based businesses are facing significantly different impacts compared to others, including other island communities.

This means the policy is likely to have significantly different effects between island communities, and a full Island Communities Impact Assessment is required under the Islands (Scotland) Act 2018.

This IBRF is anticipated to have an overall positive impact on businesses in the eligible sectors on eligible islands. However, businesses on many islands will not be eligible, as they have not experienced ferry disruption at the same scale. We accept that this does not mean that those islands are unaffected by ferry disruption, and that some stakeholders may see this as a limitation.

Available data shows that a significant number of businesses on islands are small or micro-businesses. We also acknowledge that this may have an impact on take-up due to the limited capacity of some businesses to engage with the application process. To address this, we have worked with HIE to ensure that the application process is as straightforward as possible.

In conclusion, the IBRF has been designed to mitigate the worst impact of current ferry disruptions based on the evidence available. This inevitably means that different islands will be affected in different ways, and we therefore consider that a full Island Communities Impact Assessment should be undertaken.