Future bright for Scotland’s small businesses - and now is the time for action

Two-thirds of Scotland’s smaller companies are exploring growth initiatives amid “renewed confidence” among business owners, new research suggests.

A poll of some 1,000 small business owners found that 34 per cent of Scottish firms expect to grow over the next three months - a rise from 27 per cent on the previous quarter. This marks the highest level since the third quarter of 2023 and brings Scotland broadly in line with the national average of 35 per cent, according to Novuna Business Finance.

Meanwhile, the number of Scottish small businesses expecting contraction or scaling down has fallen to just 7 per cent, from 11 per cent in the previous quarter - the lowest figure across any UK region.

Jo Morris, head of insight at Novuna Business Finance: 'The challenges of recent years have undoubtedly tested the resilience of Scottish small businesses'

The research suggests that this renewed confidence is influencing plans for the future, with 67 per cent of Scottish business owners considering it a good time now to invest time and money into specific projects that would deliver further growth in the months ahead.

Looking at specific growth initiatives, the survey revealed that controlling costs was the top priority for Scottish small firms. Among those with plans for growth, almost half (48 per cent) were focused on reducing fixed costs to “strengthen financial stability and resilience”. Hiring more staff ranked next, with 25 per cent of businesses planning to ramp up their headcounts.

After London, Scotland had the highest proportion of businesses considering new hires. There was also a sharp rise in businesses aiming to enter new markets abroad, with 19 per cent of business leaders eyeing overseas expansion - an year-on-year increase of eight percentage points in this area.

Investment in new equipment was also high on the list of priorities, with 22 per cent of Scotland’s small businesses considering this option, broadly in line with the national average of 23 per cent.

Jo Morris, head of insight at Novuna Business Finance, said: “The challenges of recent years have undoubtedly tested the resilience of Scottish small businesses, but we are now seeing clear signs of recovery and renewed optimism. Confidence is returning, with a 12-month peak in terms of the number of Scottish small businesses expecting growth this quarter - and many more are laying the groundwork for future success.

“Despite the economic headwinds, Scottish businesses are proving adaptable and this quarter marks a turning point, with more businesses planning to invest in new equipment, expand into overseas markets, and create jobs.”

The findings are explored in detail in a new report, published this week by Novuna Business Finance, called “Growth Outlook in 2024: Tracking Small Business Confidence Over Time”.

Last month, a separate study found that small businesses in the UK had suffered a “disheartening” drop in confidence as employment costs took their toll. Confidence fell back into negative territory in the second quarter of this year, losing the ground made up by the first quarter’s “welcome return” to positive sentiment among Britain’s smaller firms, according to the Federation of Small Businesses (FSB). Construction was the least optimistic of the main sectors in the latest FSB snapshot.

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