Scotland sees poor business-creation - but jump in SMEs planning to invest

Scotland has seen its rate of business-creation lagging behind the rest of the UK – but nearly a third of firms are eyeing considerable investment during 2021, according to a major new survey.

The lender has found that almost a third of Scots SMEs plan to invest £10,000 to £10 million this year. Picture: contributed.

The Virgin Money Business Pulse report looks at small and medium-sized enterprises (SMEs) across the UK – and says it spans more than 1,000 decision- makers at such firms, providing a detailed study of their performance, “and the environment in which they operate”.

It found that the pulse score for Scotland fell to 38 – while the annual rate of business-creation north of the Border came in at 5.9 per cent in the fourth quarter of 2020.

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However, the annual growth rate in the number of registered companies in the UK surged to a record 8.3 per cent – the highest since the Business Pulse began in 2014 – and Glasgow-based Virgin Money, which owns the Clydesdale and Yorkshire banks, cited Companies House data showing that the pandemic has seen 90,000-plus more businesses created in 2020 than in 2019.

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Almost a third of Scottish firms surveyed said they plan to invest between £10,000 and £10 million this year, a “marked” increase on 25 per cent in 2020. Looking at the UK as a whole, more than a quarter of SMEs plan to invest more in their businesses in the year ahead than during a typical pre-pandemic year – with 35 per cent intending to invest £10,000 to £10m this year, a rise on 32 per cent from 2020.

Additionally, nearly two thirds of Scottish SMEs who took part in the study currently have staff on furlough, but just 18 per cent expect to be able to retain all furloughed staff after the relevant support scheme ends. That said, 11 per cent expect to take on more employees in 2021 as they focus on pursuing growth.

Looking at the UK as a whole, 57 per cent currently have staff on furlough, but just one in five expects to be able to keep them all on – and 38 per cent expect to shrink their workforce this year, although more positively, nearly one in five expect to boost their ranks this year.

The overall measure of business performance and outlook rose to 45.9 in the third quarter from 33.6 in the previous three-month period – but the return of lockdown restrictions at the end of the year saw it drop to 42.9, which remains below pre-pandemic levels.

Gavin Opperman, group business director at Virgin Money – which has 6.5 million customers across the UK – said: “It has been an incredibly challenging environment over the last 12 months, but our latest Business Pulse shows that many firms have adapted with incredible pace to the new environment, demonstrating extreme resilience and innovation to navigate through the difficult landscape.

“While there are undoubtedly significant challenges ahead, many businesses remain optimistic and intend to invest for the future as the economy recovers. We will always be led by our customers, evolving our approach to help them plan and finance the changes needed for whatever the future brings.”

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