ALMOST one third of firms could fold as Covid-19 leaves Scotland’s “unprepared” knowledge economy with nowhere to go, new research warns.

Almost 80% of the country’s companies are in the service or information sectors, selling consultancy, education, research, media, logistics and other solutions to other businesses and the public.

According to newly published research, most of these firms had no strategies in place to deal with disruption in their markets.

And it’s warned that almost one third of these enterprises are now at “high risk of collapse”.

Professor Kiran Fernandes of Durham University said: “The Scottish economy is primarily comprised of the quaternary and tertiary (79%) sectors. This ‘knowledge’ economy primarily drives the Scottish economy. Most companies in sectors have never experienced such an external shock and therefore were not prepared with mitigation strategies for their complex global supply chains.

“Our study shows that many of the supply chain configurations within the knowledge and secondary [manufacturing] sector not only need investment but an internationalisation strategy that can help these high-tech companies connect to trade corridors beyond the existing networks.”

Fernandes and colleagues at Durham University Business School reviewed almost 270,000 companies in 99 sectors across Scotland to examine the potential impact of Covid-19 on their supply chains, looking at four broad priority areas – investment, innovation, inclusive growth, and internationalisation.

The team says Scotland now needs policies that support “rapid innovation” and “inclusive growth”, particularly for “high-risk” sectors like ICT, scientific and technical activities and support services. It also drew up six tailored mitigation strategies to help managers “navigate their company in this time of crisis”.

The school is now offering free consultations, through its Centre for Technology and Innovation Management, to guide companies towards what it says is the best way forward. Fernandes said: “We believe that it is critical and timely that we work with our regional businesses and ecosystems to ensure that our expertise can be used to make them develop both short-term and long-term resilience strategies that can help them not only survive, but compete in the post Covid-19 environment.”

The report comes as the Scottish Chambers of Commerce (SCC) business network issues a fresh warning about the “catastrophic decline in cashflow” reported by its members.

In a snap survey of around 350 firms, half said they think they will run out of cash within just three months – the same length of time that virus mitigation measures are expected to be in place. Of these, more than one in ten anticipate running dry within less than one month. More than three in five said they believe there are gaps in the current business support measures offered by government. Half of firms have either furloughed at least 50% of their workforce already, or plan to do so.

SCC chief executive Liz Cameron said: “If we are to prevent the Scottish economy from being damaged beyond recognition, businesses need cash in the bank now to be fit for when the country is able to start returning to day to day activities.”

Applications opened yesterday for a share of an £100 million grant support package for small and medium sized businesses, and the self-employed. The funds will be distributed by councils and enterprise agencies and will begin to pay out within days.

Economy Secretary Fiona Hyslop said: “Our economy has been hit hard by this crisis and previously profitable businesses have seen demand dry up overnight. Our support will help alleviate the hardship.”