Coronavirus (COVID-19) update: Economy Secretary's statement on economic impact of COVID-19 - Tuesday 21 April 2020
Statement given by Fiona Hyslop to the Scottish Parliament
Presiding Officer, the Covid-19 public health crisis has led extremely quickly to an economic crisis which is global in nature, but also very local, impacting on many people and businesses in Scotland.
To combat the spread of the virus, many businesses have already closed and we face an enormous challenge in helping other businesses to survive, to provide jobs and to service the economy.
Can I thank all businesses and their workers following the social distancing guidance, the essential sectors and supply chains for continuing to keep the country running and those companies who have repurposed to manufacture supplies for the health sector.
We estimate that up to 70% of the workforce is still working, many delivering health, care and welfare, but many others working from home and often combined with childcare and home schooling. By staying home they are playing their part in tackling the virus. They are helping to protect the health service and save lives.
As Covid-19 continues to have a significant impact across the world there is major uncertainty in financial markets, supply chains and the functioning of the global economy as many countries – including Scotland – have had to reduce economic activity to stop the spread of the virus.
Latest surveys for Scotland show a similar pattern to other countries with falls in business activity in March, sharper even than during the financial crisis.
The Chief Economist’s State of the Economy report published today, projects that Scottish GDP will fall by a third during the period of social distancing.
It is important however to put the economic impacts in context. This is no normal downturn and we need to view economic data and projections in that light – recognising that productive and profitable businesses across Scotland have been required to pause activity to support the public health effort.
We have pursued three main aims for the economic response to date.
- To keep companies in business and with productive capacity so that they can recover
- To keep staff in employment with appropriate income protection and support
- And most importantly to provide support to staff so that they can self-isolate and provide care to loved ones
It is in everyone’s interest to help companies through this turbulent period.
The UK Government has the immediate fiscal and macro-economic powers to respond to this economic crisis, and have made substantial, welcome commitments to support businesses and employees.
However, it doesn’t fully meet the needs of Scottish businesses. There are still significant gaps in both the Job Retention Scheme and the support for the self-employed. Last week, along with the Finance Secretary, I wrote to the Chancellor outlining the changes that need to be made.
I am also pressing the UK Government to urgently share data on implementation of support schemes so we are better able to tailor our support to businesses.
To address Scotland’s specific needs we announced additional funding to fill some gaps in the UK Government’s schemes.
There is no doubt that we will be dealing with the uncertainty of the impacts and duration of this virus for some time.
I engage regularly with businesses, business organisations and the unions; building consensus in recent weeks in support of our four step economic plan:
- and Recover
Initially we have focused the majority of our efforts on the Response stage.
Our package of business support is now worth more than £2.2 billion and is delivering almost £900 million of rates relief, and we continue to work with local authorities to progress our £1.3 billion business grants scheme. There is support to the fishing industry of up to £22.5 million announced by the Rural Economy Secretary, and the Transport Secretary has agreed further measures to support the bus industry of £92 million, ferry operators of £45.7 million and rail franchisees of £254 million.
We continue to work closely with the UK Government and Oil and Gas UK to assess what more can be done to support the sector during its immediate and longer terms challenges.
The Trade Minister has been working on procuring international and domestic supplies for the health service. On Saturday, 10 million masks arrived at Prestwick airport and over the course of this week 100,000 litres of sanitiser will arrive at the NHS central distribution warehouse.
And our Enterprise organisations have provided advice and support to over 178,000 companies.
The additional £100 million we allocated last week will be a vital lifeline for Scottish individuals and businesses to relieve hardship; protecting the newly self-employed ineligible for other support and viable micro and SME businesses in distress who may be ineligible for UK Government sources of funding or not in receipt yet of the funds they need to survive.
The grant funding will be channelled through Local Authorities and Enterprise Agencies and open for applications by the end of April, with recipients receiving funds in early May. The provisional allocation will see £34 million for the newly self-employed, £20 million for creative, tourism and hospitality companies not in receipt of business rates relief and £45 million for vulnerable but vital firms to Scotland’s local and national economic foundations.
The recently self-employed, excluded from the UK’s scheme but suffering hardship, will be able to receive £2,000 grants. For creative, tourist and hospitality companies of up to 50 employees, there will be easy access £3,000 hardship grants or larger grants up to £25,000 where it can be demonstrated it is needed. The support and grants for pivotal SME enterprises will depend on the specific need of the enterprise and be developed by the relevant enterprise agency with wraparound support.
I also recognise the challenges faced in the cultural sector so reliant on social interaction in theatres, music venues, galleries and festivals. For artists facing hardship I was pleased to announce yesterday an additional £1 million to Creative Scotland’s Bridging Bursaries Fund.
Because of our decisions, thousands more businesses, including some vital sectors of the economy benefit from support not available elsewhere in the UK. There will still be gaps so we continue to engage with businesses on a regular basis to understand their needs and press the UK Government to deliver for them.
The re-set phase we are now entering involves preparation to know what a safe re-start will look like sector by sector across the economy and what needs to be done to help businesses deliver this.
Together with industry sector leads and trades unions we are developing sector by sector guidance to give assurance and confidence as closed businesses at some point re-open and restart economic activity, but only when the scientific and health advice supports it.
For example, the Housing Minister and the Construction Leadership Forum have formed a cross industry group to address the wider issues needed to get the industry started again following lockdown.
Over the coming months our plan for economic re-start and recovery will need to be managed in a safe, and orderly way.
Public sector spending on infrastructure accounts for around 50% of all construction activity across Scotland, so our infrastructure investment will play a vital role in how we reset, restart and recover the economy.
So far, only essential construction activity continues in the sectors delivering critical national infrastructure – such as primary healthcare, energy, telecoms, transport and water.
These networks and systems are vital to our ability to keep our country moving and sustain as much economic activity as possible in the current crisis. As we all know, our digital infrastructure has proved to be an essential lifeline for people, businesses and services across Scotland.
The re-start itself may be phased and a slower but more effective restart will reduce the danger of a second wave of the virus and avoid a false re-start for the economy requiring further closures.
On Recovery, it will not be quick and the post-crisis world will be very different, with different business practices, different markets and different behaviours.
Last week, I announced the establishment of an Economic Recovery Advisory Group. I am sure members will agree that independent expert advice is more important than ever.
This Group will be steered by Benny Higgins and will include Professor Sir Anton Muscatelli.
The challenge I have set for this Group is to engage, analyse and listen to those being affected by this crisis and to bring forward solutions to enable our economy to recover quicker and better.
Mr Higgins will lead engagement with the business community, alongside the Enterprise organisations. And I am pleased that Lord Smith, Chair of Scottish Enterprise, has agreed to be part of this process, to gather the views on the business aspects of the economic response.
And we will go wider, with active engagement with trades unions, local government, third sector and environmental representatives. Because, how the economy recovers is relevant to everyone.
And I am setting a demanding timetable – with proposals to Government by the end of June. These proposals will be taken forward alongside a range of other sources of expert policy advice as we implement the Government’s agenda to build a wellbeing economy and to ensure a green recovery
The Advisory Group will draw on input from the Council of Economic Advisers and I can now announce further members of the Group including:
- Dame Sue Bruce, (non-executive director with Scottish and Southern Energy)
- Professor Anna Vignoles (Professor of Education at the University of Cambridge)
- Professor Dieter Helm (Professor of Economic Policy at the University of Oxford)
- Grahame Smith (outgoing General Secretary of the Scottish Trades Union Congress)
- Professor John Kay (Professor of Economics at the London School of Economics)
To conclude, the Scottish Government recognises the significant impact that the response to Covid-19 is having on Scotland’s economy, businesses and people. We are doing everything we can to mitigate that impact, responding to the crisis and resetting as much economic activity as we can.
At the same time, we are planning ahead to restart the economy and, in due course, to support economic recovery.