The Islands and Highlands have almost double the proportion of population self-employed as the rest of Scotland – and a wealth of small businesses as well.

So they need special backing from Government action on housing, regulations and infrastructure as part of the bid to increase the number of younger people in the workforce.

This is stated in a response by the Federation of Small Businesses Scotland to the Scottish Parliament’s Rural Economy and Connectivity Committee looking at the Islands (Scotland) Bill.

The FSB Scotland says: “The Islands Bill is strategic and enabling in nature. We have, therefore, focused our response on setting out a range of issues affecting island businesses and how key aspects of the Bill, such as an Islands Plan and island duties on public bodies, could help address these challenges.

“To better understand the implications of an Islands Bill for smaller businesses, we undertook survey work with firms from Arran to Unst, asking them about priorities for improving their local community.”

The FSB’s survey was open to small businesses (not just FSB members) based on all of Scotland’s inhabited coastal islands. The survey was conducted over two weeks in September 2017 and 280 responses were received.

This found “the top priority for action is to increase the number of economically active people, (whether employed or self-employed), through the retention of more local young people and the encouragement of more young families to move to islands.

“While the population of Scotland’s islands increased by four per cent in the census decade 2001 to 2011 (reversing a three per cent decline in the previous decade), this growth was uneven.

“The four most populous islands (Lewis and Harris, Mainland Shetland, Mainland Orkney and Skye) account for 65 per cent of the total island population and together account for most of the four per cent increase.

“More worrying is the steadily aging population demographic. While the 2011 figure for under 16 year olds is the same for the islands as the rest of Scotland at 17 per cent, in 2001 it was 20 per cent. Moreover, the proportion of those aged 65 and over stood at 21 per cent, an increase of 2.5 per cent on 2001.

“Businesses benefit from a vibrant, diverse community in the creation of local markets for goods and services, a healthy local labour market, as well as the critical mass necessary to support a range of other businesses and services - from post offices to local schools.

“The need to “encourage young people to stay on/young families to move in” was the top priority, cited by 38 per cent as a priority for the next five years and 54 per cent for the next ten years.

“Other priorities for the short term include improvements to transport and infrastructure; affordable access to superfast broadband; and affordable housing. Priorities in the longer term included; protecting the environment and sustainability; improvements to transport and infrastructure; and affordable housing. “

The FSB says: ”The 2011 Census highlights that 13 per cent of residents were self-employed, as against seven per cent for Scotland as a whole. In the Shetland and Orkney Islands alone, smaller businesses annually contribute just under £1bn to their economies. Put simply, islanders are more entrepreneurial – because they have to be.

“Overall, islands are seen as good places to do business by island business owners (87% of respondents) and only 20 per cent of businesses have ever considered relocating from an island to the mainland.”

However, “it is also clear that island businesses face a number of specific challenges. These often relate to additional costs of delivering goods and people to and from islands, as well problems arising from a smaller local population.

“When asked whether they faced different challenges to businesses on the mainland, including those in rural and remote areas, 89 per cent agreed they faced different challenges.

“The general cost of living and the added costs applied to island communities for freight and shipping services is damaging my business as well as the cost/reliability of inter-island travel and travel to the UK mainland, all of which restricting the growth of my business.”

“Mainland businesses in the form of national supermarket chains and corporate franchises continually threaten local island businesses and future island sustainability with absolutely no compunction. This needs to be looked at very seriously.”

Over a third (37%) of island businesses believe that a lack of access to suitably skilled staff is currently preventing them from expanding, with nearly two thirds (64%) saying that they are affected adversely by the lack of a local workforce. Associated with workforce issues, nearly half (46%) say they are affected by a lack of affordable housing, a third (32%) by a lack of access to training facilities/courses, and a fifth (21%) by a lack of transport options (for them and staff) to and from work.

“With low unemployment on most islands, limited availability of local skills and labour, as well as concerns about the work-readiness of those not in employment, it is no surprise that previous FSB survey work indicated that 41 per cent of Highland businesses with employees currently employ at least one person from the EU.

“We would not expect this figure to differ a great deal when restricted to island businesses. This compares to 25 per cent of employers across Scotland. We have repeatedly called for a right to remain for current EU workers but the impact of Brexit remains an additional concern in relation to access to skills and labour.

“Finally, while we recognise that the Bill is concerned only with our islands, it is worth considering the implications of the Bill for remote mainland communities (some of which can only be reached by boat). Many other North and West Highland areas suffer from the same remoteness barriers as islands. Government should consider how these areas might benefit from successes arising from the Bill. “

As a member of the Scottish Regulatory Review Group (RRG), FSB “has been at the forefront of better regulation policy in Scotland for a number of years. We are therefore keen to see how new duties could help ensure that future policies or regulations do not unnecessarily penalise island businesses.

“However, in our experience, impact assessments are rarely used to good effect. Firstly, they are best used as a policy development tool – but are too often completed as a ‘tick box’ exercise after policy decisions have been made. Secondly, discussion with frontline businesses (where relevant) is a critical but rarely undertaken part of the process.”

The FSB survey asked businesses whether they had ever come across regulations or other rules created by government (or government agencies) which they feel are unfair or unworkable for business on islands. “We received a wide-ranging response, with many of the suggestions relating to regulations which generally created difficulties for small businesses.

"While these comments relate to current, rather than the future, plans, they do typify the sorts of issues that frustrate businesses and it is clear that there is scope to ensure that future legislation and public policies are island-friendly.

"However, we would also advise that it is worth considering whether island-proofing has the potential to give island-based businesses a competitive advantage over businesses in neighbouring mainland areas, for whom the same degree of inappropriateness could apply."

Examples of difficult rules and regulations currently in operation and highlighted by island-based businesses include:

  • Regulations preventing some materials being transported by ferry – and inconsistencies between ferry captains as to who will carry what.
  • Planning regulations that make it difficult to erect new buildings in rural areas away from “areas of best fit”.
  • The public sector preferring to procure goods and services from mainland businesses rather that from local businesses.
  • The favouring of large developers from the mainland wishing to open in islands over home-grown businesses
  • Regulations from Food Standards Scotland.
  • Fishing quotas impacting on island-based businesses.
  • The Air Discount Scheme’s removal from island-based private businesses, but not from competitor social businesses.
  • Waste collection inconsistencies, e.g. Orkney’s Outer Isles have to pay for heavy uplift while Mainland Orkney can access a free amenity site.
  • A lack of access to what are supposed to be universal medical services.