Rural Scotland Business Panel survey: report

Executive Summary

This report presents findings from the first Rural Scotland Business Panel survey carried out in October/November 2021.

Overview and key findings

This first wave of the Rural Scotland Business Panel survey was carried out at a time when businesses were grappling with a range of economic challenges. In addition to the ongoing recovery from Coronavirus (COVID-19), businesses were operating against a backdrop of increased inflation, record fuel prices, widespread reports of fuel shortages and the disruption to the wider supply chain.

Against this background, the survey highlighted a number of key findings in relation to the attitudes, behaviours and priorities for rural businesses at this time, including:

Key findings

Despite challenging economic circumstances, rural businesses were generally confident in the economy and were optimistic about their future prospects. In terms of future aspirations, around a third were striving for growth while half were content with their current level of performance.

Most businesses had experienced increased costs in the last 12 months and this was their top concern. Response to increased costs varied, but businesses were more likely to have absorbed those costs than passed them on to customers through price increases.

Supply chain issues were common, particularly in relation to accessing the goods, materials, or supply of services needed. These supply chain issues had contributed to increased costs and a range of other impacts.

Half of businesses were experiencing labour shortages, either as a result of recruitment or retention challenges or from staff absences.

Moving to net zero was seen as important but, in the short term, the top priorities for businesses were keeping pace with new technology and innovation.

Optimism and performance

• Thinking about the economic outlook for Scotland over the next 12 months, 60% of businesses were confident, while 38% were not. Most had seen their confidence either increase (17%) or remain stable (48%) in the past six months. For 34% of businesses, confidence had decreased
• Three fifths of businesses were operating at either the same level (40%) or over and above the level (20%) they were before COVID-19. Just under two fifths (39%) were operating below their pre-pandemic levels
• Over the past six months, sales or turnover performance was mixed, while employment had remained relatively stable. Exports were more likely to have decreased than increased but had remained stable for around half of businesses.
• Most (77%) businesses were optimistic about their prospects in the next 12 months, but 22% were not.
• In terms of their current aspirations, just over a third (37%) were striving for growth while half (50%) were content with their current level of performance. Around one in ten (12%) wanted to downsize.

Top priorities and concerns

• Of the five areas explored, top priorities for businesses over the next 12 months were keeping pace with new technology (54%) and innovating or evolving what they do (47%).
• Moving to low carbon ways of working was least likely to be a priority within the next 12 months (26% said it was), but a further 39% said it was a priority for the next 5 years, making it the third highest priority overall.
• The most significant concerns for businesses were increased costs (81%), followed by economic uncertainty (67%), changing regulations (56%), supply chain issues (56%) and retaining customers (56%).

Financial concerns and access to finance

• Overall, around a third (35%) of businesses were concerned about at least one of these aspects of their finance: low or no cash reserves (26% concerned), access to finance (15%) and existing debt (15%).
• Just over half (55%) were currently using or planning to use external finance. A quarter were already using loans from banks or financial institutions (25%), public sector loans or grants (25%) and credits or overdrafts (23%).
• The main reason for using or planning to use financial support was for cash flow (28%) followed by buying new assets (16%) and working capital (14%).
• Half (50%) of businesses had applied for financial support in the past 12 months. Of those, 95% had been successful (78% getting all and 17% some of what they wanted). Only 5% were turned down on everything.

Increased costs

• The majority of businesses reported cost increases across almost all measures asked about in the survey. The exceptions were cost of premises and business rates, which remained relatively stable.
• Among those that had experienced cost increases in the last 12 months, 36% had absorbed those costs internally, 13% had increased their prices, and 48% had done both.

Labour and supply chain issues

• Among businesses for whom it was relevant, 48% said they had experienced labour shortages: 39% arising from recruitment or retention challenges, and 38% arising from staff absence.
• The three most common impacts of labour shortages were: increased workload for other staff (36%) difficulties in delivering services or fulfilling orders (16%) and scaling back production or services (14%).
• Among those for whom it was relevant, three quarters (73%) were experiencing some form of supply chain issue. In particular, 70% were experiencing issues accessing the goods, materials, or supply of services they needed, while around half were experiencing issues with export processes (47%) and transportation of goods to customers (44%).
• Four in five (82%) businesses that were experiencing supply chain issues said this had led to increased costs.

Markets

• Around three quarters (72%) of businesses were importers. The largest market was England and Wales (67%) followed by the European Union (EU)(34%), outside the EU (20%) and Northern Ireland (18%).
• The majority (97%) of businesses sold goods or services within Scotland, with half selling only in Scotland and half exporting outside of Scotland.
• Thinking about the 12 months ahead, there was a sense of cautious optimism about future sales. Businesses generally expected either stability or an increase in sales to the markets they operated in.

Net zero

• The vast majority (93%) of businesses were currently taking some action(s) to reduce their greenhouse gas emissions. The top three actions were: recycling and minimising waste (89%), using more locally sourced supplies (69%) and improving energy efficiency of premises (48%).
• The most frequently mentioned barriers to reducing emissions were: cost of making changes (73%), lack of green transport options (55%) and difficulty making existing premises more energy efficient (55%).

Workforce and Fair Work

• Among employers, 46% considered their business to be employee-owned, while 54% did not.
• Around a third of businesses had staff on furlough (Coronavirus Job Retention Scheme) in the few months leading up to end of the scheme (up to 30th September 2021). Of those that did, the majority (84%) said recently furloughed staff were back in their usual role.
• The majority of businesses (76%) were taking measures to support Fair Work for their staff. Around two thirds (65%) were paying the real Living Wage, 59% were committing to flexible working and 51% had Diversity and Inclusion policies. Fewer, 35%, were measuring their gender pay gap.