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Scotland Industry Update 2020

Welcome to the Close Brothers Asset Finance update of the Scottish SME industry. In this document we highlight a wide range of issues relevant to SMEs in this industry. 

The results are based on the Close Brothers Business Barometer, a quarterly survey of close to 1,000 SMEs across the UK conducted by specialist independent researcher, Lightspeed, on Close Brothers’ behalf. Where relevant, comparisons are made with national sentiment. 

Economic outlook

Scottish SME business owners’ economic outlook is less positive than the rest of the UK, with only 22% of those polled confident that the economy will grow (UK: 36%); a further 23% feel that while it will take longer, better times are ahead (UK: 27%). 

Four in 10 SMEs are concerned that the economy could decline and haven’t experienced any true economic growth. 

Looking ahead, 64% of Scottish firms expect their performance to remain static, while a quarter are hoping to expand their operations in 2019; 11% believe their business will either contract or shut down. 

Mental health

While the impact of mental health problems continue to be felt across the SME community, with 30% (UK: 40%) of Scottish firms reporting that at least one of their employees has taken time off work because of it, attitudes are changing. Only 6% of SMEs in the sector are of the view that feelings towards those suffering from mental health problems are becoming worse, against 26% who say it’s changing for the better; the remaining 48% haven’t noticed a change in attitude. 

In addition, 30% (UK: 38%) of Scottish SMEs have noted an increase in reporting of mental health issues over the last three years while 48% of Scottish firms polled have taken steps to actively raise awareness of mental health among employees. 

Concerns and priorities

‘Maintaining cash flow’ is the most pressing concern for Scottish firms, followed by ‘late payments’ and the ‘lack of skilled staff.’ Many companies operate in sectors where margin pressure is high and any events that impact cash flow – including late payments - can have a disproportionate impact on a business’s productivity.

‘Achieving growth’ and ‘business consolidation’ are Scottish companies’ main priority, followed by ‘paying down debts.’ This could be indicative of firms, in the face of significant uncertainty, battening down the hatches.  

Finance requirements

Financial advisors and accountants are the first port of call for financial support and advice, ahead of bank managers, which clearly demonstrates their changing role in the modern business environment. Bank managers are now more remote from the finance decision-making process and consequently don’t have the type of relationship with business owners that they had historically. 

A third of firms polled are finding it a ‘major challenge’ to access the funding they need and more difficult than it was a year ago. A further third are saying that it hasn’t become any easier to get hold of finance and is as problematic as it’s ever been. 

The remaining third say it’s either become easier or they’ve ‘never had a problem accessing finance.’

Despite the challenges obtaining finance, 48% of business owners in Scotland said that they will be seeking investment funding in the coming 12 months. This figure is significantly lower than the UK as whole, which stands at 62%. 

Charity support

Scottish firms are convinced that charity support and fundraising is important to employee morale, with a combined 54% feeling it creates a bond in the team and gives their workers something positive to focus on. The other 46% feel it either ‘makes no difference’ or is a ‘distraction.’ 

Four in 10 Scottish companies surveyed actively support a charity, which is well behind the UK average of 53%. However, some firms feel that they’re not ‘big enough’ to support a charity. 

While 52% of firms feel that supporting a charity says something positive about a company's culture, a further 29% think people are suffering from ‘donation fatigue.’

Ageing workforce

Despite Scottish SMEs overwhelmingly understanding the benefits of employing older workers - with their experience being particularly valued along with their ability to mentor more junior members of the workforce – 62% feel that the recruitment process discriminates against older workers. 

And while 42% of firms are comfortable with being able to recruit the talent they need in the coming five years, 44% are predicting problems in the future and a further 14% say they’re already struggling.