THE collapse of firms costs Glasgow more than £196million a year in lost tax.

As a result, the city council has launched the first scheme of its kind in the UK to save smaller firms from going under.

A new report says more than 99% of businesses in Scotland are small or medium-sized enterprises providing two out of three private sector jobs.

But research suggests governments across Europe have failed to recognise the importance of providing support when a business is transferred from one owner to another.

A city council report states: "This is particularly surprising given the survival rate of new businesses after five years is somewhere between 35% and 50%, depending on the industry sector and economic climate.

"This is compared to a rate of between 90% and 96% for businesses that have been transferred. The cost of business failure is damaging to local economies.

"The private cost can be severe, particularly when an owner retires and has been unsuccessful in finding a buyer or the seller does not receive a fair price for what might be a profitable business."

The city council has decided to step in to strengthen the local economy by helping retain businesses which can continue trading and make a valuable economic and social contribution to the city.

A survey carried out last year found around half of the firm owners questioned plan to sell their business in the next five years.

Under the Glasgow Business Transfer Loan Fund, grants will be avail-able to assist entrepreneurs and existing business owners to buy a going concern.

The report continues: "The overall purpose of the programme is to safeguard jobs in Glasgow.

"The programme will not be target based on the number of companies supported but rather on the number of jobs safeguarded.

"By ensuring 200 jobs that would otherwise be lost to the city are secured, a conservative saving of around £1.5m can be expected in terms of lost tax and national insurance, as well as other business-related tax and insurances lost through business failure."

The £1m fund will offer loans up to a maximum of £100,000 from the council.

Any loan will depend on the transfer safeguarding jobs and showing potential for growth.

Council spokesman for jobs and the economy Liz Cameron said: "We hope that this loan fund will help to provide for the transfer of successful Glasgow busi-nesses and their employees to a new owner."

vivienne.nicoll@eveningtimes.co.uk