Small Business Survey Scotland: 2018

4. Business Practices 

Innovation^[18]

Process innovation

21 per cent of SME employers in Scotland introduced new or significantly improved processes for producing or supplying goods or services in the last three years, in line with the prior year (20 per cent) and consistent with the proportion in the UK as a whole (21 per cent). Of those SME employers that had introduced new or improved processes, 78 per cent introduced process innovations that were all just new to the business, while 22 per cent introduced at least some process innovations that were also new to the market.

Process innovation was more common amongst medium-sized firms (39 per cent). By sector, process innovation was higher than average in the Information/Communication sector (45 per cent) and lower than average in the Transport/Retail/Distribution sector (13 per cent). All other sectors were broadly in line with the overall SME average (Figure 5). 

Figure 5: SME employers introducing new or improved processes in the last 3 years

Base: all that introduced new or improved processes, 208

Investment in R&D (cohort C only^[19])

New for 2018, SME employers were asked if their business had invested in research and development (R&D) in the last three years. 16 per cent of SME employers had invested in R&D in the last three years, in line with the UK as a whole. 

Medium-sized business (29 per cent) were more likely than average to have invested in R&D. By sector, SME employers in Information/Communication (35 per cent), Primary (34 per cent), and Manufacturing (32 per cent) were more likely than average to have invested in R&D. Least likely to have invested in R&D were those in the Transport/Retail/Distribution (four per cent) and Construction (zero per cent) sectors.

Training 

48 per cent of SME employers in Scotland had arranged or funded any training (off the job training^[20] and/or on the job training^[21]) in the past 12 months, broadly in line with the proportion in the UK as a whole (47 per cent). The figure in Scotland was broadly similar to the previous year when it stood at 51 per cent (in the UK as a whole, the proportion was lower than the prior year when it stood at 49 per cent).

Table 3 below shows the proportions of SME employers in Scotland that had arranged or funded any training in the past 12 months. Medium-sized and small businesses were much more likely than average to have arranged or funded training.

Table 3 SME employers that had arranged or funded training in the past 12 months by size (%)

Base: all SME employers, 836

	Micro 1-9	Small 10-49	Medium 50-249	All
Any training	42	73	91	48
Off the job	32	62	81	38
On the job	31	59	78	37

Figure 6 below shows the proportion of SME employers in each sector that had arranged or funded any training in the past 12 months. Businesses in the Manufacturing sector (62 per cent) and the Other Services (61 per cent) sectors were more likely than average to have arranged or funded any training, while businesses in the Transport/Retail/Distribution (37 per cent) sectors were less likely than average to have arranged or funded any training. 

Figure 6: SME employers that had arranged or funded training in the past 12 months by sector (%)

Base: all SME employers, 836 – Base minimum: Information/Communication, 35

70 per cent of SME employers that offered training in Scotland had arranged or funded any training (off the job training and/or on the job training^[22]) for managers in the business in the past 12 months, similar to the proportion in the UK as a whole (68 per cent)^[23]. 

Small businesses (80 per cent) were more likely than average to have arranged or funded any training for managers. By sector, businesses in Business Services (90 per cent) and Other Services (82 per cent) sectors were more likely than average to have arranged or funded any training for managers. Businesses in Primary (47 per cent) and Construction (53 per cent) sectors were less likely to have arranged or funded any training for managers. 

The most common forms of training that managers received were technical, practical or job-specific skills (88 per cent), health and safety (71 per cent) and leadership and management skills (44 per cent) (Figure 7).

Figure 7: Types of training for managers (%)

Base: all that offered training for managers, 411

Apprenticeships^[24] (cohort A only)    

Eight per cent of SME employers in Scotland offered formal apprenticeships (i.e. apprenticeships that lead to a recognised qualification) in the last 12 months. This was broadly in line with the proportion in the prior year (12 per cent) the UK as a whole (12 per cent).

Small (26 per cent) and medium-sized businesses (36 per cent) were more likely than average to have offered formal apprenticeships in the last three years. 

Apprenticeships were most common in the Construction sector (21 per cent) (Figure 8). 

Figure 8: Formal apprenticeships in the last 12 months by sector (%)

Base: SME employers (Cohort A only), 273

Base minimum: Information/Communication, 12

An estimated 12 per cent of SME employers in Scotland intended to have an apprenticeship start in the next 12 months, in line with the UK as a whole.

Business plan

In 2018, 35 per cent of SME employers stated that they had a formal written business plan which was kept up-to-date (broadly in line with the proportion in the UK as a whole, at 33 per cent). Small (49 per cent) and medium-sized firms (54 per cent) were more likely than average to have an up-to-date business plan.

Working for the public sector (cohort B only) 

In 2018, 19 per cent of SME employers in Scotland expressed an interest in, or bid for, any contract advertised by the public sector^[25] (higher than the proportion in the UK as a whole, at 10 per cent). This was broadly in line with the proportion in 2016, when the question was last asked in this survey. 

Businesses in the Information/Communication (64 per cent) sector were more likely than average to have expressed an interest in, or bid for a public sector contract, while businesses in Transport/Retail/Distribution (nine per cent) were less likely.

28 per cent of SME employers in Scotland had actually done business for the public sector in the previous 12 months (higher than the proportion in the UK as a whole, at 23 per cent), broadly in line with the proportion in 2016 (30 per cent). By sector, businesses in Information/Communication (57 per cent) were more likely than average to have done business for the public sector in the previous 12 months. 

The main customers within the public sector were local authorities (68 per cent of SME employers that worked for the public sector named them as their main client), Scottish Government (18 per cent), UK Departments of State (5 per cent), higher and further education institutions (three per cent) and the NHS (two per cent).

Business support

In 2018, 28 per cent of SME employers had used external information or advice on matters affecting their business in the previous 12 months, broadly similar to the proportion in 2017 (32 per cent) and the proportion in the UK as a whole (26 per cent). 

The most common reason for using information or advice was financial advice (accounting or general running of business), cited by 25 per cent of SME employers that used information or advice in the last 12 months (Figure 9). 13 per cent also cited financial advice (how and where to get finance)^[26]. 

Figure 9: Reasons for using information or advice (%)

Base: all that used information or advice, 265

In 2018, the most common source of information or advice for SME employers in Scotland was their accountant, cited by 37 per cent of SME employers that used advice in the previous 12 months, followed by consultant/ general business advisor (34 per cent). 

Living Wage 

This section examines issues related to the payment of the Living Wage, as defined by the Living Wage Foundation. Businesses can choose to pay the Living Wage to all their directly employed staff, aged 18 or above, on a voluntary basis. At the time the 2018 survey began, the Living Wage was set at £8.75 per hour outside London and rose to £9.00 from November 2018^[27]. It should be noted that the Living Wage, as defined by the Living Wage Foundation, is different from the National Living Wage which is the legal minimum wage for employees in the UK.

In 2018, 78 per cent of SME employers in Scotland paid all their employees aged 18 or over (excluding volunteers, apprentices and interns) at or above £8.75 per hour, the Living Wage as defined by the Living Wage Foundation at the time the survey began. This is an increase from 70 per cent in the previous year. 19 per cent of SME employers did not pay the Living Wage to all their employees, down from 28 per cent in 2017, and two per cent did not know. Small (65 per cent) and medium-sized firms (69 per cent) were less likely than average to pay the Living Wage (Figure 10). 

Figure 10: SME employers paying the Living Wage as defined by the Living Wage Foundation (%)

Note: the Living Wage stood at £8.75 per hour for the 2018 survey.

Base: all SME employers, 836 

By sector, SME employers in the Business Services (94 per cent) and Manufacturing (90 per cent) sectors were more likely than average to pay the Living Wage. Businesses in the Transport/Retail/Distribution sector (66 per cent) were less likely than average to pay the living wage. Figure 11 shows the proportions of SME employers paying the Living Wage by sector.

Figure 11: SME employers paying the Living Wage by sector (%)

Base: All SME employers, 836 - Base minimum: Information/Communication, 35

Of those SME employers in Scotland who were either paying the living wage or were unsure as to whether they were paying the living wage, five per cent stated that they received accreditation as a living wage employer from the Living Wage Foundation, slightly higher than the proportion in the prior year (three per cent). 89 per cent stated that they had not and six per cent did not know. 

Scottish Business Pledge 

In 2018, 1 per cent of SME employers surveyed in Scotland were signed up to the Scottish Business Pledge. A further 16 per cent were aware of the Scottish Business Pledge but not signed up, while the vast majority were not aware of it (82 per cent). 

Engagement with local community

69 per cent of SME employers in Scotland considered their business to be actively involved in their local community, broadly in line with the prior year (65 per cent). Small firms were more likely than average to consider their business to be actively involved in their local community (77 per cent). 

Engagement with ‘best practice’ schemes

Figure 12 shows the proportions of SME employers that engaged with a range of ‘best practice’ schemes. 

Figure 12: SME employers engaging with ‘best practice’ schemes 

Base: all SME employers, 836 

10 per cent of SME employers engaged with Scottish Modern Apprenticeships^[28], broadly similar to the proportion in the previous year (12 per cent). Just two per cent of SME employers were engaged with the 50/50 by 2020 gender balance commitment.

Prompt Payment Code

Of those SME employers in Scotland who received trade credit, nearly half (47 per cent) engaged with the Prompt Payment Code, a significant increase from the previous year (35 per cent). 

Working hours arrangements

Figure 13 shows the proportion of SME employers offering a range of working hours arrangements to their employees. The most common working hours arrangement was flexitime, offered by half of SME employers. Nine per cent of SME employers offered zero hour contracts. 34 per cent of firms offered none of these arrangements to their staff.

Figure 13: Working hours arrangements available to employees (%)

Base 2018: all SME employers, 836