The latest Inverclyde Chamber of Commerce (ICC) Quarterly Economic Indicator (QEI) survey for Q2 of 2020 confirms the economic pain that has been felt by Inverclyde business across sectors due to the Coronavirus (COVID-19) outbreak and the subsequent lockdown.

The survey, conducted in partnership with Strathclyde University’s Fraser of Allander Institute and Scottish Chambers of Commerce, is Scotland’s longest-running economic survey of its kind.

The poll, which ran throughout May and June 2020, shows that the vast majority of businesses in Inverclyde continue to fear for their survival, with many challenges expected ahead for individuals and households through the threat of redundancies.

Nearly one-third of businesses (30%) surveyed said they expect employee numbers to drop during July and September, with 79% of firms stating they do not expect to recruit during the same period.

All of the firms surveyed stated that all of their investment has gone towards innovation and creating new products of procedures to develop, safeguard or support their ongoing operations and ability to reopen.

• 30% of businesses are concerned at the need to make potential redundancies in the coming quarter;
• 79% expected to not recruit during the same period, with 45% of employees experiencing a decrease in wages;
• 72% of businesses have not applied for credit during the previous Covid-19 affected quarter;
• 81% have seen a reduction in cash flow during the last quarter, with 83% reporting a decrease in profits; and
• Over half of the responses fear a further decrease in revenue in the coming quarter.

Gavin McDonagh, ICC President, said:

“In many instances, these results are among the worst over the 30-year history of the survey. However, the circumstances of which they have arisen means that they should come as little surprise.

“COVID-19 has drastically halted or limited activity across all sectors of the Scottish and global economy, and Inverclyde with its existing challenges naturally feels this harder than other areas where we have already acquired the dreaded COVID Capital tag.

“Unhelpful tags like these can often take years to shift to challenge people’s and the media’s perception of the area.

“The £800 million additional funding received through the Barnett formula from the Chancellor’s Summer Statement on Wednesday is a welcome boost to support Scottish business recovery.

“It is now up to the Scottish Government to work with business and target support where it is most needed – protecting jobs and ensuring young people can access training and support.

KEY HIGHLIGHTS

• On business confidence: Levels of confidence have fallen to historic lows in many of the sectors, with construction, retail and tourism most affected by the crisis.

• On employment levels: Employment trends suggest the UK Government furlough scheme has been successful in limiting the scale of job losses locally. However, negative employment expectation levels highlight the long-term challenge for businesses to retain employees and protect jobs.

• On cashflow levels: Cashflow – a key economic indicator of how a business can cover costs and report profits – has fallen to record lows for many sectors. Every sector, except for manufacturing, has seen a higher proportion of firms applying for credit.

• On business concerns and cost pressures: Many businesses will have had to rely on cash reserves and government support schemes to meet fixed costs, with overhead costs rising across all sectors. There is the potential of a ticking VAT timebomb given several organisations choosing this option over taking credit.

Mr McDonagh continued:

“Businesses are eager to do whatever they can to adapt to what will be a testing business environment, which will include changing workplace practises, dramatically evolving business models and re-skilling the workforce which will be critical across all sectors.

“It is critical that Governments in Holyrood and Westminster and Inverclyde Council continue to provide business support for companies during and beyond the easing of lockdown restrictions.

“The Kickstart Scheme is a practical step in the recovery that will protect existing jobs while creating new ones.

“Also, the Jobs Retention Bonus scheme will act as a bridge to support the thousands of jobs that have been maintained through the furlough scheme. Employers will need this incentive to ensure they can deliver sustainable employment.

“Inverclyde Chamber called for targeted VAT reductions for the hospitality and tourism industry, and the Chancellor has listened. These reductions are welcome as hard-pressed businesses in the tourism and hospitality sectors are in desperate need of such lifeline support.

“A sudden end to these vital financial support measures would not be welcome by anyone, and a tsunami of jobs will disappear overnight, which we have already seen developing over the past month nationally and now locally sadly.

“Inverclyde’s businesses are bruised, and it is still the case some are likely to fail. But those that are ready and able to get back to work are showing some signs of confidence they could make it through and prosper.”

“The Chamber stands ready to work with government and Inverclyde Council on the detail of these schemes to ensure they are successfully delivered on the ground.”

The full Q2 Quarterly Economic Indicator survey results can be viewed here.