The number of Scottish businesses predicting a better year ahead in terms of turnover and profitability has increased over the last quarter of 2023, a new survey has found.
But the latest quarterly Understanding Business report shows that firms are still generally cautious and face challenges when it comes to finding staff though concerns about inflation and taxation are beginning to ease.
And while he faces battles on a number of fronts, First Minister Humza Yousaf’s more positive approach to engaging with business appears to have paid dividends with two in five businesses (43%) now saying the Scottish Government is concerned with the needs of business, an increase from 36% in September.
The survey also shows challenges around working arrangements and preferred hours of candidates pose a challenge for around a quarter of businesses that have attempted to recruit in the past three months.
More than 600 businesses of all sizes and from a variety of sectors across Scotland took part in the latest Understanding Business survey which is published each quarter jointly by research specialists The Diffley Partnership and public affairs and communications agency, 56° North.
Reflecting on the last year, the survey found that while a majority felt conditions had worsened, that figure has fallen from 71% to 58% since September and almost one in five (19%) felt conditions had improved, a jump from 9% three months ago.
The number of businesses expecting things to improve in 2024 is now almost three in ten, 29%, up from 17% three months ago and those expecting things to worsen in 2024 has fallen to 39% with 32% saying things will stay the same.
A significant number of businesses (41%) now say turnover will increase and those saying profitability will go up is up to 37% from 27% in September.
Firms report that skill shortages are making recruitment difficult with 57% citing this as an issue. Job applicants are increasingly citing hours and flexible working conditions as important factors when applying for jobs, with 26% of firms saying this was a factor, an increase from previous surveys.
More than half of those businesses surveyed (55%) say they allow regular working from home with 22% of businesses stating that staff are able to choose their own working patterns.
When it comes to businesses’ biggest concerns overall, inflation remains top of this list. However the proportion of businesses concerned about this has fallen to 49%, from 60% three months ago. Concerns about taxation have also fallen from 49% to 43%. Bigger businesses, those with more than 250 staff, are more likely to express concern over inflation and taxation.
When asked about whether the Scottish or UK Governments understand the needs of business, the figures continue to show signs of improvement. The Scottish Government figure is up significantly to 43% from 36% in September. The UK Government figure is up to 30% from 26% last time.
Mark Diffley, Director and Founder of The Diffley Partnership, said: “The third edition of Understanding Business reveals a mixed sentiment on economic conditions, hinting at a gradual shift towards a slightly more optimistic outlook. Encouragingly, looking ahead, there is a rising confidence in improved turnover and profitability.
“The embracing of remote work reflects a lasting impact of the pandemic, shaping a potential new normal in work arrangements.”
John Penman, Managing Partner of 56° North, said: “The cautious optimism is encouraging but it’s still far too early to say that businesses are confident about the economic outlook.
“There is now growing evidence that businesses believe the Scottish Government is taking their needs more seriously though challenges remain especially if taxation continues to increase.”