Scottish businesses tested by rising costs and staff shortages

The average Scottish business owner is now more pessimistic than the UK average. 

Scottish business confidence lowest since 2020 according to FSB index amid rising costs and staff shortages iStock
FSB index: Scottish figure is at its lowest since 2020.

Scottish business confidence is at the lowest point in nearly two years, amid mounting overheads, skills shortages, and concerns about the economy.

In the last three months, nine in ten Scottish firms (91%) reported an increase in costs in the second quarter of 2022 survey work conducted by the Federation of Small Businesses (FSB) shows.

FSB’s Small Business Confidence index for Scotland stands at -31.8 points for the second quarter of 2022, which is down from +14.3 points recorded at the start of the year.

The index measures businesses’ views on whether trading conditions will improve or deteriorate over the coming months. 

This quarter’s Scottish figure is the lowest since the last three months of 2020.

The statistics show that the average Scottish business owner is now more pessimistic than the UK average. 

However, the UK index has also dropped, falling to -24.7 points and down more than 40 points in the same quarter last year.

Access to skilled staff was raised as one of the biggest barriers to growth by two in five (39%) Scottish respondents, only behind concerns about the domestic economy which were cited by three in five operators (59%). 

The research also found that three in five (61%) Scottish businesses have been running below capacity over the quarter.

Asked to identify the source of increasing costs, 73 per cent of Scottish businesses pointed to fuel while 67 per cent highlighted utilities.

Andrew McRae, FSB’s policy chair for Scotland, said: “Across Scotland, many independent and local businesses are finding trading conditions merciless.

“Overheads are rising, and every penny spent at the pump or on energy bills is cash that can’t be used elsewhere. Businesses in sectors such as retail, tourism and hospitality – especially in rural areas – are finding it difficult to recruit and retain staff.

“These factors mean that far too many businesses say they’re operating at far from their maximum capacity, which in turn slows down their ability to recover from the hits they took over the course of the pandemic.

“Whoever is next to get the keys to 10 Downing Street should prioritise measures to help local and independent firms face these challenges and play their part in economic recovery.”

A recent statistical publication from the ONS and Scottish Government found that, while a majority of Scottish businesses are seeing month-on-month increases to overheads, only about a quarter are passing this increase onto their customers. 

The same research found that difficulties in recruiting employees had been experienced by almost half (45%) of Scottish businesses.