Rural Scotland Business Panel Survey October 2022

5. Viability

Key findings

The majority (88%) of businesses were confident that their business would be viable over the next six months, while 11% were not.

The biggest perceived risk to viability was rising costs (83% said it was at least a medium risk). This was followed by reduction in customer demand (62%) and ability to access supplies (57%). Over four in ten felt workforce challenges (46%), low levels of stock (44%), increased competition (43%) and low or no cash reserves (41%) were risks, while around a third mentioned access to markets (33%) and access to finance (31%).

Most businesses (88%) felt equipped to respond to risks to their viability, while 11% did not.

Confidence in business viability

The majority (88%) of businesses were confident that their business would be viable over the next six months, while 11% were not (Figure 5.1).

Variation in confidence

Confidence in business viability was higher than average among:

• businesses in the Highlands and Islands (91%) and South of Scotland (91%) compared to the rest of rural Scotland (87%),
• businesses with 5-10 (94%, 11-24 (94%) or 25+ staff (95%), and
• financial and business services businesses (93%).

Confidence was lower than average among:

• those with 0-4 staff (12%),
• tourism businesses (15%),
• busineses in remote rural areas (13%),
• those impacted by EU Exit (13%), COVID-19 (13%) and rising costs (12%), and
• those behind where they wanted to be on competitiveness (25%), skills development (19%), productivity (18%), and adoption of technology (14%).

Risks to viability

The biggest perceived risk to viability was rising costs (83% said it was at least a medium risk). This was followed by reduction in customer demand (63%) and ability to access supplies (57%).

Over four in ten businesses felt workforce challenges (47%), low levels of stock (43%), increased competition (44%) and low or no cash reserves (42%) were risks, while around a third mentioned access to markets (33%) and access to finance (32%) (Figure 5.2).

Variation in risks to viability

In terms of sectoral variation:

• Tourism businesses were more likely than average to feel at risk from rising costs (91%), reduction in customer demand (72%), ability to access supplies (63%) and access to finance (37%).
• Food and drink businesses were more likely to feel at risk from: rising costs (89%), ability to access supplies (69%), workforce challenges (55%), access to markets (38%) and access to finance (37%).
• Creative industries were more likely to feel at risk from a reduction in customer demand (72%).

The following businesses were more likely than average to say most of these issues was at least a medium risk:

• Businesses operating below pre-pandemic levels
• Those striving for growth and seeking new ways of doing things
• Those impacted by EU Exit, COVID-19, the Russia-Ukraine conflict and rising costs
• Those behind where they would like to be on productivity, competitiveness technology adoption and skills performance
• Those importing from outside the UK.

Ability to respond to risks

Most businesses (88%) felt equipped to respond to risks to their viability, while 11% did not (Figure 5.3).

Variation in ability to respond to risks

The following businesses were less likely to feel equipped to respond to risks to their viability:

• Food and drink (15% not equipped) and tourism businesses (15%)
• Those operating below pre-pandemic levels (16%)
• Businesses impacted by COVID-19 (13%) and rising costs (12%), and
• Those behind where they would like to be on competitiveness (23%), skills development (18%), adoption of new technology (17%) and productivity (17%).

Ability to respond to risks was similar for each of the individual risks that businesses were experiencing (see Appendix A).