Scottish Economy

We must back rural and island economies

The latest national lockdown is a bitter blow for businesses across Scotland.

Of course, the vast majority of business owners understand the best way to protect the economy in the long run is to control the spread of the virus and accelerate the vaccination roll-out. But this doesn’t offset the scale of the immediate challenge.

Support schemes have been extended, including Scottish Government grants and the UK Government’s furlough and loan schemes. This is all welcome and both governments are continuing to offer unprecedented support. But there remain reports of delay in accessing certain schemes, coupled with confusion over eligibility. It also is deeply regrettable that many businesses, particularly the self-employed, continue to be excluded.

The new lockdown means many more businesses will be under pressure, not least because of the closure of schools and the implications for employees balancing work with home-schooling responsibilities.

While nationwide support schemes have advantages, the reality of this crisis is that communities across the country are not being equally impacted. In new research, my colleague Stuart McIntyre and I have shown many of Scotland’s rural and island communities are particularly exposed, given the make-up of their economies and limited alternative employment opportunities.


A Highlands and Islands Enterprise (HIE) business panel recently found nearly 70% of Highlands and Islands businesses reported economic confidence had decreased over the last six months. In tourism, the figure was over 80%. The immediate outlook for the region looks challenging. The panel found one in two businesses are still operating at below pre-Covid levels. And nearly one in four employers still have staff on furlough, with over half of those planning on cutting hours or issuing redundancies.

We’re also seeing the emerging effects of Brexit on many of these communities. Some fishing businesses are already facing difficulties in accessing export markets.

All of Scotland has benefited from a steady flow of European Union migrant workers in recent years. But with Covid-19 interrupting this supply just at the time when more restrictive post-Brexit UK migration rules are being rolled out, the well-known population challenges our rural and island communities face will become more acute. On top of this, many of these communities face a number of longstanding challenges that put them at a disadvantage. Some of these reflect the challenges of geography. Others reflect national policy priorities lying elsewhere.

But there are some reasons to be positive. Demand for stay-at-home vacations is forecast to increase, providing opportunities for hotels, B&Bs and tour operators once restrictions are eased. The switch to digital, and online sales, has for some businesses closed a relative “gap to market” that acted as a barrier to growth in the past. The HIE business panel also reports a pick-up in businesses adopting new ways of working, with many of these changes – from a drive to quality produce, through to focusing on new markets and environmental sustainability – likely to bring long-term benefits. But these communities will need support.

There’s now greater recognition of the importance of inclusive growth and the role regions can play in achieving this. But delivering on this requires that our rural and island communities – economies that often seem far-removed from policy debates in Westminster or the central belt – receive the right support – not just from local but national government too.

The scale and type of support will look different to what is required in other parts of the country, but this shouldn’t be seen as a barrier. One-size-fits-all rarely works.

If we are to “build back better”, we need to ensure that we focus not just on the national recovery, but rebuilding robust economic communities in Scotland too.


Picture of Graeme Roy, director of the Fraser of Allander Institute
Graeme Roy

Dean of External Engagement in the College of Social Sciences at Glasgow University and previously director of the Fraser of Allander Institute.