HUNDREDS of millions of pounds in public cash will be used by ministers to guarantee private sector loans in a move designed to counter uncertainty caused by Brexit.
The scheme, which will see the taxpayer become liable to pay back loans should companies qualifying for the initiative default on payments or go bust, was described as a "exceptional response to an exceptional economic challenge" by Nicola Sturgeon.
The support package will be open to small and medium sized firms otherwise struggling to win finance that would allow them to grow, with the Government to act as a guarantor for up to £5m for each company, taking on much of the financial risk of a the loan that would usually rest with the lender.
In some cases the Government may pay out loans direct to firms, with £500m available in total for the next three years. The announcement came as Ms Sturgeon said her Programme for Government, which also saw her unveil a string of infrastructure schemes which have been brought forward in a move also designed to shore up the economy.
The First Minister said: "This is a half billion pound vote of confidence in Scottish business, Scottish workers and the Scottish economy. We are determined to build an economy where everyone has a fair chance to contribute to growth, and where everyone can share the benefits of growth."
The program, labelled the Scottish Growth Scheme, will require treasury approval and support from other parties at Holyrood, if it is to come into force. However, senior SNP sources are confident that it will not be blocked in London and win support among opposition MSPs.
It will be open to firms with high growth potential with credible export plans, and is aimed particularly at technology-intensive sectors and business in new markets.
Andy Wilcox, Scottish Policy Convener at the Federation of Small Businesses said: "Despite the current economic headwinds, businesses are still ready to invest. Thus, we will be interested to see what sort of small businesses are eligible to take advantage of the Scottish Growth Scheme. We need to make sure that government initiatives back our business base."
Hugh Aitken, the CBI Scotland Director, welcomed many of the initiatives outlined by Ms Sturgeon and described the loan guarantee scheme as "encouraging". However, he expressed disappointment that the First Minister had not heeded calls to abandon a hike on business rates for larger firms that was introduced earlier this year by the SNP and does not apply in England.
He said: "Following the vote to leave the European Union, and against a challenging fiscal backdrop, the Scottish Government has outlined plans to drive growth by focussing on education, physical and digital infrastructure, and access to finance. But this announcement did not go far enough to mitigate concerns around business rates.
"Larger organisations will be disheartened by the lack of movement on the large business supplement. Currently, large firms pay double what similar firms pay south of the border, and this impedes rather than incentivises investment."
In her annual statement, Ms Sturgeon also announced steps to ensure the entire country has access to broadband and establish a national manufacturing institute in partnership with the private sector and academics.
She confirmed controversial plans to slash Air Passenger Duty, for the integration of the British Transport Police north of the border into Police Scotland and a Social Security Bill focused on new welfare powers.
Details of a Housing Bill, Child Poverty Bill and Domestic Abuse Bill were among 14 that will be introduced at Holyrood over the next year.
The government will use new powers to legislate for more women on the boards of public bodies, with the First Minister saying this would "help ensure the public sector leads by example in delivering true gender equality".
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