Worry about the economy doing badly in the coming year has increased among Scottish businesses and a majority say things have deteriorated over the last 12 months, according to the latest Understanding Business survey.
In a sign that the Government’s message of deterioration before any improvement may be getting through, 47% expect economic conditions to worsen in the coming 12 months – a jump of nine percentage points compared to the last survey in June.
Around three in ten (29%) believe that economic conditions will be about the same and only a quarter (24%) believe that they will be better.
Over half (51%) of those surveyed stated that conditions have worsened over the past year which is a slight improvement compared to earlier in 2024, when 60% held this view, but shows that optimism remains low.
Only 19% believe conditions have improved, down from 22% in mid-2024, reflecting ongoing concerns about the economy.
Understanding Business is an independent quarterly survey of over 500 Scottish businesses of all sizes from all over the country, produced by research company Diffley Partnership and public affairs and strategic communications consultancy 56° North.
The latest report comes on the back of recent consumer surveys which show increasing pessimism about economic conditions after a period of growing optimism. The Understanding Business survey also found that recruitment challenges persist, with nearly half of businesses attempting to hire and six in ten (57%) of those recruiting citing a shortage of skilled applicants as a difficulty during recruitment.
While lack of applicants fell to 41% from 70% in June 2023, the lack of appropriate skills continues to be a significant barrier to workforce expansion, alongside rising salary expectations.
John Penman, Managing Partner of 56° North, said: “Labour’s message in its first few months in power has been all about making tough decisions because government finances are in such a poor state.
“While that may be useful to lower expectations ahead of the coming Budget, they must be careful. People in business and potential investors will need to see more optimism if they are to be encouraged to help ensure stronger economic growth.”
There was some positive sentiment towards GB Energy, the publicly owned energy company the Labour government has committed to setting up based in Scotland. Though 55% of businesses reported knowing at least a little about GB Energy proposals, detailed knowledge remains limited. Only 4% of respondents say they know a lot about the initiative, while over a quarter (28%) report they have heard of it but know almost nothing.
Despite this, more than half (53%) believe that GB Energy will have a positive impact on Scottish businesses, with job creation, reduced carbon emissions and lower energy bills seen as key potential benefits.
Businesses are largely optimistic about the impact of GB Energy, with 44% believing it will create jobs in Scotland. Other anticipated benefits include reducing carbon emissions (37%) and lowering household energy bills (36%). In addition, respondents expect GB Energy to contribute to improving energy security and providing opportunities for renewable energy projects, indicating broad support for the initiative’s long-term goals.
Mark Diffley, Founder and Director of Diffley Partnership, said the findings showed that while some businesses saw the potential benefits of GB Energy, awareness of its purpose remained low.
“GB Energy is well thought of by those who know something about it, but those numbers are low, and detail about it is sparse,” he said.
“There wasn’t much movement in the survey in terms of what business thought about net-zero though they said the need for Government support was still high. If GB Energy is going to play a role in driving net zero, the Government clearly has a lot of work to do to raise its profile and extol its benefits.”
