Confidence, Performance And Low Carbon Highlighted In Latest Business Survey For Highland But Problems Faced By Many Businesses

1st May 2023

This latest release from Highland and Islands Enterprise perhaps needs careful reading as it does not mention some of the huge problems facing in the economy facing businesses. Of course it wants to emphasis the positive views but no reference to many empty shops in High Streets.

Dire figures on Scottish Insolvencies add to the negative outlook.

Further reports recently about almost 20000 less businesses in a year do not seem to reflect confidence. The businesses who replied to the survey do not reflect the views of businesses that ceased or went bust. Some of the issues faced by businesses are probably going to get harder such as increasing interest rates and the cost of living affecting their customers.

With that all in mind read the report -

There are signs of a potential recovery in the confidence businesses in the Highlands and Islands have in Scotland's economic outlook, although individual business performance appears to have declined slightly.

This is according to the findings of the latest rural business survey, commissioned by Highlands and Islands Enterprise (HIE) in partnership with South of Scotland Enterprise (SOSE).

The survey, carried out by Ipsos during February and March, also showed that increasingly Highlands and Islands businesses appear to be embracing the drive to cut carbon emissions as an effective means of tackling rising energy costs.

Almost all (95%) of the 1,006 businesses in the region that provided feedback said they were reducing the environmental impacts of their operations, or plan to within six months. Actions include using locally sourced services and supplies, recycling, re-using or re-purposing by-products and using more energy efficient equipment.

Two thirds (68%) are currently improving, or soon to improve, the energy efficiency of their premises. Actions include surveying premises for energy efficiency, using measures such as smart sensors and thermostatic controls, improving thermal efficiency of buildings and using low carbon or renewable energy sources for heat and power. Most (84%) of those taking action (58% of all respondents) had resources or plans in place to support this, including access to external advice/support (60%), sustainability or low carbon policies (41%), internal expertise (36%) or budget (27%) and reduction targets (29%).

Confidence in the economic outlook for Scotland increased from 41% to 50% since the previous survey carried out in October and November 2022, though this is still lower than the 60% evidenced for this time last year.

Despite growing confidence, individual business performance was down on the previous survey, with 29% saying they had performed well over the past six months (down from 36%).

While 29% had increased sales or turnover, only 15% saw an increase in profit margins and 42% reported a decline.

In line with the previous survey, most (85%) businesses were very (46%) or fairly (39%) confident in their viability over the next six months. This was slightly higher (89%) among those in urban parts of the region.

Seasonality remains a key factor with more than half of businesses (54%) saying they were strongly dependent on a certain time or times of the year for their operations.

As expected, this was particularly high for tourism (91% dependent) and food and drink (70%) businesses. Tourism businesses are more reliant on the months from March/April to September/October (47% vs 23% overall), while spring (43% vs 26%) and autumn (50% vs 23%) are most critical for the food and drink sector.

The main concerns for businesses over the next six months remain similar to previous surveys, being dominated by rising costs - nearly three quarters (74%) highlighted this. Other concerns include economic uncertainty (30%), profit margins (23%), supply chain disruption (20%), reduced customer demand (19%), access to labour (17%) and depleted cash reserves (17%). A fifth (19%) were concerned about wellbeing or burnout for themselves (10%) or their staff (9%).

Three in four businesses (75%) were importers, sourcing goods from outside Scotland. Most of those (72%) were importing from the rest of the UK. Almost a third (31%) imported from international markets, down from 39% in June/July 2021. Cost (76%) and quality (72%) were the key factors in determining where to source supplies, followed by supporting local businesses (57%).

Half of businesses were exporters, selling to markets outside Scotland - 48% to the rest of the UK, and 28% internationally. This was in line with the previous survey, but markedly lower than the 62% in June/July 2021.

Just under one in five (18%) businesses were taking steps to focus more on selling within the UK than internationally. For these businesses, reasons behind the shift included challenges associated with transportation (35%), the UK market being more reliable (35%) and more profitable (25%), cost (32%) and complexity of paperwork (29%).

Martin Johnson, HIE's director of strategy and regional economy, said:

"It's certainly encouraging to see even such a modest recovery in confidence in Scotland's economic outlook. Our region has a long history of various challenges, and our economy has evolved against that background. As a result, it's fairly responsive and with a higher proportion of small to medium sized enterprises than you might expect to find elsewhere. This helps with flexibility when businesses need to adapt and innovate quickly, and that's certainly something we've seen in recent years.

"The motivations behind the extent to which businesses are working to reduce their carbon emissions may well differ from business to business. It seems clear though that many are thinking very hard about costs and recognising that cutting carbon emissions can also mean cutting costs.

"As always, we're extremely grateful to all those who provided valuable feedback in the survey, and this will be used to inform business support policy and priorities."

The rural business survey report for the Highlands and Islands is available on the HIE website Business Panel page