Islands business resilience fund: island communities impact assessment

4. Assessment

Our assessment highlights some unique impacts on island communities because of sustained ferry disruption. These include risks to local economic stability of the most impacted islands – particularly in relation to the visitor economy and perishable goods sector.

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.

Scope

As outlined above; to maximise the impact of available funding (£4.4 million), the IBRF has been designed to support the islands and sectors most impacted by disruption.

Islands that have experienced significant direct disruption, defined as 15% or more direct cancellations over the past three contract years include South Uist, Colonsay and Arran.

In addition, some other islands have experienced significant indirect disruption due to having to take alternative, less convenient, ferry routes and encountering delays as a result of the extra pressure on the remainder of the network. These islands are:

• North Uist
• Eriskay
• Benbecula
• Berneray
• Grimsay

Targeting both direct and indirect impacts ensures the IBRF reflects the realities of ferry cancellations 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, in response to this current period of sustained and significant disruption and specifically cancellations, the Scottish Government has established the IBRF to mitigate the impact on the worst-affected islands’ businesses and support their resilience going forward.

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 help monitor the IBRF’s effectiveness and identify any further support needs.

Eligibility criteria^[1]

Eligibility is focused 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 (>15% of all scheduled sailings). 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 most 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 (please see below).