Rural Scotland Business Panel Survey October 2022

1. Introduction

The Rural Scotland Business Panel Survey

The Rural Scotland Business Panel was established to measure and monitor the economic health of rural Scotland through capturing the experiences and opinions of rural businesses and social enterprises. It was commissioned through a partnership of the Scottish Government, Highlands and Islands Enterprise (HIE) and South of Scotland Enterprise (SOSE).

This report presents the findings from the third round of the Rural Scotland Business Panel survey. The previous surveys took place in October/November 2021, and February/April 2022^[2]. The aim of the survey is to ensure that the voices of rural businesses are represented at regional and national level. Survey findings will help address existing data gaps by providing consistent and comparable data on businesses in each region and across rural Scotland overall, allowing the Scottish Government, HIE and SOSE to explore emerging opportunities and challenges and to track change over time. Findings will help inform resource prioritisation and policy development within and across the public sector. The HIE and SOSE Business Panel surveys are distinct components of the overall survey, with findings reported on separately as well as within this report^[3].

The survey covered a range of topics including: economic optimism, business performance, growth aspirations and motivations, viability, workforce and responding to change.

Context

The survey was carried out in the midst of increased inflation, rising energy prices and widespread reports of a "cost of living crisis". The Office for National Statistics (ONS) reported that the UK economy contracted by 0.1% in the second quarter of 2022, leading the Bank of England to warn of a likely recession at the end of the year. In this wave, businesses were therefore operating in very challenging economic circumstances.

In relation to the pandemic, this was the first wave of the survey carried out since the lifting of COVID-19 restrictions across Scotland (on 21 March 2022). Businesses may have had their own arrangements in place to help limit the spread of the virus, but there was no legal requirement to do so.

As further context for the survey, in June and July rail services across Scotland were impacted by reduced journeys due to a pay dispute, with a full day strike taking place on 27 July 2022. This may have impacted on businesses across rural Scotland that were usually reliant on rail.

Methodology

Fieldwork

The survey was conducted with businesses and social enterprises across rural Scotland between 6 June and 29 July 2022, using telephone interviewing. In total 2,719 eligible interviews were achieved.

Geographic coverage

The survey covered three geographic areas:

• Highlands and Islands (the area covered by HIE), including: Argyll and the Islands, Caithness and Sutherland, the Inner Moray Firth, the Outer Hebrides, Lochaber, Skye and Wester Ross, Moray, Orkney and Shetland.
• South of Scotland (the area covered by SOSE), consisting of Dumfries and Galloway and the Scottish Borders.
• The rest of rural Scotland. This area included all other parts of rural Scotland not already covered by the HIE and SOSE samples. For the purposes of this survey, 'rural' was defined as categories 2 to 6 of the Scottish Government's six-fold Urban Rural Classification^[4] (see Table 1.2), excluding any parts of category 2 that were within travel to work areas^[5] centred on Large Urban area (therefore excluding category 2 areas that are within commuting distances from Glasgow, Edinburgh, Aberdeen or Dundee, which share some of the infrastructure and operating environments of those large urban centres).

The map in Figure 1.1 shows the broad areas covered by the survey.

The number of achieved interviews in the three areas is shown in Table 1.1.

The profile of the businesses that took part in the survey covered a range of categories in the six-fold Urban Rural Classification (Table 1.2), with more than half (55%) being in either a remote or accessible rural area. Further details of the profile of the survey sample are shown in Appendix B and a map of the six-fold Urban Rural Classification is provided at Appendix C.

In this report, survey findings have been condensed into three categories: remote rural (category 6), accessible rural (5), and small towns and peripheral urban areas (2 to 4). Grouping categories 2, 3 and 4 together allows more statistically significant variations between groups to emerge because of the larger sample size involved.

Sampling

The survey sample was based on an overall business base of 94,275 businesses across rural Scotland.

The survey sample was sourced from two sources. First, contact was made with members of the existing HIE, SOSE and Rural Scotland business panels^[6], that had taken part in previous waves and indicated they were willing to be re-contacted. The remaining sample was sourced from the Dun and Bradstreet business database and was stratified by sector and size to reflect the population of businesses in rural Scotland.

Quotas were set for recruitment and interviewing so that the achieved sample reflected the population of eligible organisations as defined by the Inter-Departmental Business Register (IDBR)^[7]. Eligible organisations were defined by the SIC (Standard Industrial Classification) code, with the following SIC 2007 Sections excluded from the sampling:

• public administration and defence; compulsory social security;
• education and health and social work;
• activities of households as employers; undifferentiated goods- and services-producing activities of households for own use; and
• activities of extraterritorial organisations and bodies.

SIC codes were used to identify areas of economic activity considered to be growth sectors^[8] (as set out in the Government Economic Strategy) so that quotas could be set to ensure these were represented in the survey sample. These growth sectors are derived from the longer list of SIC code categories (as outlined in Table 1.3) and are used for analysis throughout the report. Where businesses do not fall within one of these categories, they are classed as "non growth sector", a collective term that covers a range of individual SIC categories (see breakdown of the sample in Appendix B).

Within each participating organisation, the survey respondent was the owner or a senior manager able to comment on the performance and future prospects of the organisation.

The achieved sample was broadly representative of the population. Nonetheless, weighting was applied to the data so that it matched the business population by broad geographic area (Highlands and Islands, South of Scotland and rest of rural Scotland), sector and size of business.

Presentation and interpretation of the data

The survey findings represent the views of a sample of businesses, and not the entire business population of rural Scotland. Therefore, findings are subject to sampling tolerances, meaning that not all differences will be statistically significant.

Throughout the report, differences between sub-groups are commented upon only where we are sure these are statistically significant, as in where we can be 95% certain that they have not occurred by chance. The typical sub-groups reported on are:

• size of business (grouped by sole trader^[9], 1-4, 5-10, 11-24 and 25+ staff),
• location (one of the three broad areas shown in Table 1.1),
• sector (using the growth sector categories in Table 1.3),
• rurality (grouped into three categories of remote rural, accessible rural, and small towns and peripheral urban areas), and
• other characteristics based on responses to the survey (for example the markets they trade with, or their growth aspiration).

Where percentages do not sum to 100%, this may be due to rounding, the exclusion of 'don't know' categories, or multiple answers. Aggregate percentages (for example "optimistic/not optimistic" or "important/not important") are calculated from the absolute values. Therefore, aggregate percentages may differ from the sum of the individual scores due to rounding of percentage totals.

Throughout the report, an asterisk (*) denotes any value of less than half a percent and a dash (-) denotes zero. For questions where the number of businesses is less than 30, the number of times a response has been selected (N) rather than the percentage is given.