Our latest Understanding Business survey in conjunction with the Diffley Partnership produced some fascinating results both economically and politically at the end of very significant year.
Scottish businesses said the UK Budget had made them consider growth and investment plans for 2025 despite a positive economic outlook and confidence about increases in profit and turnover.
And in a clear link to the Government’s decision to increase National Insurance for employers, many say they will consider measures to mitigate the cost including reducing headcount, cutting hours, increasing prices and delaying investment.
Optimism about growth steadily increasing
The final survey of 2024 showed some positivity about growth in the coming year. Over four in ten (43%) businesses said they expected turnover to grow in the next year, an increase of six percentage points on September. Meanwhile 38% anticipate increased profitability, up four percentage points since September.
And there was positive news for the SNP. When asked who understands business best, the Scottish Government was at 48%, the highest figure since the survey began with the UK Labour Government at 31% – slightly up on the last Tory government’s final rating.
The independent quarterly survey of over 500 businesses of all sizes across Scotland also paints a picture of business remaining resilient but increasingly seeking tangible government policies to ensure long term sustainability.
Over four in ten (43%) say they believe turnover will improve in the coming year with 38% saying they expect profits to increase, a jump of four points from the last survey in September. This fits with a five-point increase to 29% saying they expect economic conditions to improve and a continuing drop in those saying they are pessimistic about the outlook.
Operational costs remain a top concern, cited as the most significant barrier to growth by 40% of respondents. Nearly six in ten (57%) businesses expect to raise their prices in the next quarter – a seven-point increase since September. Price increases are seen to be driven by workforce costs (33%) and utility expenses (35%). Taxation pressures have risen sharply, with 31% now identifying it as a major factor for increased prices – up eight points since September and 18 points since December 2023.
Hiring staff still proving tricky
Recruitment remains a significant hurdle, with only 45% of businesses reporting attempting to hire in the past three months — the lowest proportion recorded in the Understanding Business series. Skills shortages are still the most commonly cited barrier (55%), but concerns about a lack of applicants have eased, falling to 35%—down 15 points since March.
In terms of specific demands from the Scottish Government, around 34% called for additional grants or subsidies for small and medium-sized enterprises (SMEs) and 33% seeking further reductions or relief on business rates.
Other priorities include expanded infrastructure investment in transport and digital connectivity (18%) and additional support for innovation and R&D (13%).
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 policy and strategic communications consultancy 56° North.
