Small Business Survey Scotland: 2021

12th January 2023

Findings for Scotland from the Small Business Survey 2021 from The Scottish Government,

Introduction
This report sets out the findings from the Longitudinal Small Business Survey (LSBS) 2021 for Scotland. It focusses on small and medium-sized enterprises with at least one employee (SME employers). It outlines the key characteristics of SME employers in Scotland and provides an overview of their perceptions on a range of themes including innovation, fair work and access to finance. In addition, the report provides an insight into business performance and outlook.

As at March 2021, there were an estimated 342,125 SMEs operating in Scotland, of which those with employees represented 31 per cent (105,905 enterprises). SMEs with employees accounted for 44 per cent of total Scottish employment and 38 per cent of turnover.

Survey method and reporting
The survey for Scotland is part of a UK-wide large-scale telephone survey of 11,483 owners and managers of SMEs, commissioned by the Department for Business, Energy and Industrial Strategy (BEIS) and was conducted between the 13th September 2021 and the 1st April 2022. The survey is the latest of a series of annual and biennial Small Business Surveys dating back to 2003. From 2015 onwards, the survey introduced a longitudinal tracking element and is now carried out on an annual basis. The longitudinal element of the survey established a ‘panel' of businesses that might be resurveyed in subsequent years. This is to allow for analysis of how combinations of factors affect business performance over time.

This report provides a snapshot of the state of SMEs with employees (defined as businesses with between one and 249 employees) surveyed in Scotland between September 2021 and April 2022. Enterprises with no employees have been excluded from the dataset on which this report is based. This is consistent with the reporting of the survey from 2015 onwards.

In 2021, 677 SMEs with employees took part in the survey in Scotland. 378 businesses in Scotland had taken part in prior year surveys ("panellists") and 299 businesses were new to the survey in 2021 ("top ups"). The survey sample is stratified by business size (micro businesses with 1-9 employees, small businesses with 10-49 employees and medium-sized businesses with 50-249 employees) and by sector (defined by Standard Industrial Classification (SIC) 2007).

The data have been weighted to ensure that the results are representative of the overall Scottish SME population. Because of changes in terms of sampling and changes to the questionnaire in 2021, data cannot always be compared with previous editions of the Small Business Survey Scotland.

Key Results
Business Demographics
66 per cent were urban-based while 34 per cent of SME employers were rural-based
28 per cent of SME employers were home-based
23 per cent of SME employers were women-led
80 per cent of SME employers were family-owned
4 per cent of SME employers were Minority Ethnic Group (MEG)-led
Trade Activities
16 per cent of SME employers had exported goods or services outside of the UK in the last 12 months, unchanged from the prior year
the proportion of SME exporters exporting to EU countries (73 per cent of SME exporters) was lower than non-EU countries (81 per cent). 18 per cent of SME exporters exported to EU countries only
40 per cent of SME employers had sold goods or services to the rest of the UK
22 per cent of SME employers had directly imported goods or services from countries outside the UK in the previous 12 months
a higher proportion of SME employers imported from EU countries (43 per cent) than non-EU countries (25 per cent)
64 per cent of SME employers imported goods or services from the rest of the UK
Business Practices
28 per cent of SME employers had engaged in process innovation (i.e. introduced new or improved processes for producing or supplying goods or services) in the last three years
46 per cent of SME employers in 2021 engaged in either products, goods, or process innovation
47 per cent of SME employers had arranged or funded training in the past 12 months
12 per cent of SME employers engaged with Modern Apprenticeships in the past 12 months
24 per cent of SME employers had used external information or advice on matters affecting their business in the past 12 months
84 per cent of SME employers paid all their employees aged 18 or over (excluding volunteers, apprentices and interns) the Living Wage as defined by the Living Wage Foundation
2 per cent of SME employers were signed up to the Scottish Business Pledge and a further 13 per cent were aware of it but not signed up

Access to External Finance
78 per cent of SME employers in Scotland were currently using external finance at the time of the 2021 survey
the most common forms of external finance currently used by SME employers were credit cards (31 per cent of SME employers) and loans from banks or building societies directly related to the Coronavirus (Covid-19) pandemic (29 per cent)
11 per cent of SME employers had sought external finance in the last 12 months
70 per cent of SME employers that had applied for finance (64 per cent) did so for working capital or cash flow reasons
the most common forms of external finance applied for were bank overdraft facilities (43 per cent of SME employers that applied for finance) and loans from banks and other financial institutions (28 per cent)
9 per cent of SME employers were discouraged borrowers (i.e. they had a need for external finance in the last 12 months that they did not apply for)
Business Performance and Outlook
30 per cent of SME employers that had been trading for at least one year had employed more people than a year previously. 52 per cent employed the same number and 18 per cent employed fewer
31 per cent of SME employers expected to employ more people in 12 months' time, and 7 per cent expected to employ fewer
of all SME employers that had been trading for at least one year, 39 per cent increased their turnover over the past year. 31 per cent had approximately the same turnover and 28 per cent had lower turnover
52 per cent of SME employers expected turnover to increase in the next 12 months, 40 per cent expected turnover to stay approximately the same and 6 per cent expected turnover to decrease
74 per cent of SME employers generated a profit in their last financial year
the most commonly reported obstacles to the success of the business were the COVID-19 pandemic (76 per cent) and staff recruitment/skills (43 per cent of SME employers). UK exit from the EU was noted as an obstacle by 40 per cent of SME employers
of those SME employers that reported UK exit from the EU as a major obstacle to business success, an increase in the cost of EU imports was the most commonly reported difficulty already experienced (56 per cent)
77 per cent of SME employers aimed to grow sales over the next three years, a ten percentage point increase from the prior year (74 per cent)

COVID-19
of SMEs in Scotland in 2021 who received the Small Business Bonus Scheme (SBBS) relief, a large majority received relief of between 91 per cent to 100 per cent, at over two thirds (67 per cent)
of SMEs that use e-commerce technologies to sell to customers, 22 per cent began selling online as a result of the COVID-19 pandemic
the share of firms who have reduced their staff count over the year preceding the survey who attribute this reduction mainly to Covid-19 was 24 per cent. This is broadly in line with the UK figure of 32 per cent and significantly lower than in the previous year's survey, which stood at 42 per cent

Energy
in 2021, 22 per cent of SME employers in cohort A in Scotland had installed some kind of energy efficiency measure in the prior year. This is broadly in line with the UK

in 2021, 63 per cent of SMEs in cohort A for Scotland had no smart meter (electrical or gas) installed on their businesses premises. This is significantly higher than the proportion of businesses UK-wide who did not have a smart meter installed, which stood at 53 per cent
82 per cent of businesses in Scotland in 2021 had no plans to install a low carbon heating system in the next 12 months preceding the survey, with a total of only 7 per cent planning to install a heating system or energy efficiency measures, or both.

To read the full report go HERE