Scottish Small Businesses Plan To Open Up New Markets In The UK As Growth Forecasts Fall

27th September 2022

Scottish small businesses started 2022 in optimistic mood, however, there has been a sharp fall in Scottish businesses predicting growth for their business this quarter, according to new research by Novuna Business Finance. In Q1, 35% of small businesses in Scotland predicted growth rising to 37% in Q2. This quarter, just 24% said they predicted either significant or modest growth - a figure that is now 10% lower than the national average, as businesses in other regions stayed relatively steady and consistent in their growth estimates.

Notably however, the proportion of businesses anticipating a period of either modest or significant decline has continued to remain low at 15%.

Reflecting this less confident outlook, the ways companies are looking to grow their business in the next six months has focussed on cost controls. Compared with the start of the year (Q1'22), there has been a significant rise in the proportion of companies focussed on improving cash flow (+9% to 32% this quarter), being stricter at getting paid on time (+8% to 23%), and streamlining their supply chain (+10% to 15%).

Meanwhile, in the same period there has been a significant fall in the proportion of businesses investing in new equipment (-17% to 13%), or hiring more people (-8% to 16%). In both cases, the proportions looking to invest was below the national average (18% investing in new equipment, and 22% hiring more people).

Focussed on UK for expansion
For those looking to secure growth, expanding into new markets was a priority for a fifth of Scottish small businesses (20%). However, these new customer markets appeared not to stray from the UK, with Scotland being the region where small businesses were most likely to favour the domestic market to secure growth for their business (87%). Their focus on expansion within the domestic UK market was higher than the national average (80%), and followed the trend of small businesses perceiving better growth opportunities in the UK versus the EU - with the national average itself rising sharply from 60% to 80% in just 12 months.

Jo Morris, Head of Insight at Novuna Business Finance said: "Despite starting the year positively, maintaining a strong growth outlook has been a challenge for many small businesses in Scotland. The market context has certainly been challenging, given rising inflation, soaring energy prices and the impact of the cost-of-living crisis. This all can bring uncertainty and impact supply chain dynamics. That said Scottish business owners appear to be the savviest at exploiting opportunities to open up new domestic markets, whether this is targeting services to new regions or diversifying a product offering."

"At Novuna Business Finance , we are serious about helping Scottish businesses to fulfil their potential and grow. This sometimes involves being agile and adapting plans to changing market conditions. With an asset portfolio of more than £1.4bn, our simple and competitive funding is designed to fit around the needs of small businesses, helping customers to buy or lease business assets. With an expert team and award-winning services, we can provide access to the finance solution our customers need, helping them to develop and grow, especially in these tricky and uncertain times."

The research was conducted by YouGov among a representative sample of 1,196 small business decision makers spanning all key industry sectors in March, June and September 2022

Notes
About Novuna
Novuna is a trading style of Mitsubishi HC Capital UK PLC, the new name for Hitachi Capital (UK) PLC and a leading financial services company, authorised and regulated by the Financial Conduct Authority (FCA). We have over 1,600 employees, £5.9bn of net earning assets and over 1.3 million customers across five business divisions; Novuna Consumer Finance, Novuna Vehicle Solutions, Novuna Business Finance, Novuna Business Cash Flow and our European division specialising in Vendor Finance. For over 40 years, formerly as Hitachi Capital (UK) PLC, we have worked with consumers and small to medium enterprises (SMEs) as well as corporate multinationals in the UK and mainland Europe, enabling millions of consumers and businesses to achieve their ambitions.

From 1 April 2021 we became a wholly owned subsidiary of Mitsubishi HC Capital Inc., strengthening our relationship with one of the world's largest and most diversified financial groups with over £66bn of assets.

Novuna Business Finance
Novuna Business Finance, the new name for Hitachi Capital Business Finance, provides business asset finance to SMEs and bigger corporations across the UK. This includes hire purchase, finance lease solutions, stocking and block discounting provided through brokers, vendor organisations, manufacturers and direct to the business community.

With an asset portfolio of more than £1.4bn, the business is active across multiple sectors from transport and agriculture to construction and manufacturing and was awarded Best Service from an Asset Based Lender at the 2021 Business Moneyfacts Awards.

The business is also supporting the Group's multiple sustainable energy projects and purchased a £10m equity share in
Gridserve Holdings Ltd, the parent company of Gridserve Sustainable Energy Ltd. Novuna Business Finance is a trading style of Mitsubishi HC Capital UK PLC, part of Mitsubishi HC Capital Inc., one of the world's largest and most diversified financial groups, with over £66bn of assets.