Small firms can play big part in tackling unemployment misery

The idea is that by the middle of the year the bulk of coronavirus restrictions will be lifted and firms will no longer need taxpayer support to pay wages. And in reality, No. 11 Downing Street is choosing to phase out the lifeline jobs scheme, slowly increasing contributions from employers over several months. With more than 340,000 Scots currently supported through the coronavirus job retention scheme (including 40,000 in Glasgow, 35,000 in Edinburgh and 20,000 in the Highlands), the stakes could scarcely be higher.

No doubt, some businesses will snap back to normal once restrictions are lifted. And possibly some firms will require more workers than usual if the spending boom predicted by some comes to pass. However, it looks likely that at least some businesses will fail when this support is withdrawn, while others – like tourism firms reliant on international visitors – will need to dramatically restructure their operations.

As a consequence of these changes, the Office for Budget Responsibility estimates that, across the UK, about 2.2 million people – or 6.5 per cent of all workers – will be unemployed later this year. If the figures about which sectors are most dependent on furlough are anything to go by, these new jobseekers will likely mostly come from the industries hit hardest by the pandemic, such as hospitality, retail and leisure. And, unfortunately if our experience to date tells us anything, it’s that women and young people will be disproportionately disadvantaged by the fall-out.

These aren’t just numbers, and every business failure or job lost as a consequence of this crisis is a tragedy.

While the death toll of this pandemic will be etched upon the record forever, unless we get our act together we’ll see what former Tesco Bank chief Benny Higgins dubbed “economic long-Covid”. His ominous report for the Scottish Government last June warned that “the pandemic and its economic impact may weigh down businesses for years to come” and unemployment may only come down to pre-Covid levels by 2024.

Given what we know about mass joblessness in Scotland, both in terms of the crushing impact on individuals and families but also the deep scars many of our communities still bear from previous economic earthquakes, we need to pull every lever at our disposal to save jobs and the businesses which provide them.

To fight back against economic downturns, first we must learn from them. And the financial crash and subsequent recession of the late 2000s taught us a valuable lesson: nine in ten unemployed people who re-entered the workforce did so by joining a small business or setting one up. We also know that small businesses have a strong track record of employing those further from the jobs market and hiring on the basis of potential, not simply qualifications.

So, by ensuring as many local firms as possible survive this crisis, and then helping these operators thrive and grow, we have an opportunity to create the jobs we’ll need.

That’s also why it’s important that initiatives like the Kickstart programme – a UK Government jobs subsidy scheme for young people that you can apply for through the Federation of Small Businesses – works for smaller firms, in addition to the corporations.

These schemes could be complemented with moves to keep the cost of employment down through a cut in employer’s national insurance contributions.

And we’re pressing for the next Scottish Government to match their Young Person’s Guarantee – a scheme to minimise joblessness among young people – with new incentives for businesses to take on older workers.

This problem can’t, of course, be solved by government alone. But I have no doubt that many local and independent firms stand ready to recruit once things pick up. Over the weeks and months to come, government’s job, in Edinburgh and London, is to create the conditions that will give business the confidence to get out there and get hiring.

Andrew McRae is Scotland policy chair for the Federation of Small Businesses