Small Business Survey Scotland: 2021

Business Practices

Innovation

Process Innovation

28 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, this appears to be higher than the prior year (22 per cent) however this change was not found to be statistically significant. Of those SME employers that had introduced new or improved processes, 86 per cent introduced process innovations that were all just new to the business, while 10 per cent introduced at least some process innovations that were also new to the market.

Process innovation was more common amongst medium-sized firms (43 per cent). By sector, process innovation was higher than average in the Other Services (PQRS) sectors (38 per cent) and Business Services sectors (37 per cent.) Process innovation was sharply lower than average in the Administrative Services sector (8 per cent) and Construction sector (4 per cent.) All other sectors were broadly in line with the overall SME average (Figure 6).

Figure 6: SME employers introducing new or improved processes in the last 3 years

Base: all that introduced new or improved processes, 240

Goods & Services Innovation

14 per cent of SME employers in Scotland introduced new or significantly improved goods in the last three years, in line with the prior year (13 per cent). 27 per cent of SME employers in Scotland had introduced new or significantly improves services in the past three years, significantly higher than the previous year (21 per cent.)

Goods innovation was more common amongst medium-sized firms (23 per cent) whereas services innovation was more common in small-sized firms (35 per cent). By sector, goods innovation was higher than average in the Manufacturing sector (31 per cent) and Information/Communication sector (25 per cent). Goods innovation was below average for all other sectors, but sharply lower than average for construction, at 5 per cent.

Services innovation was very high compared to average in the Information/Communication sector (58 per cent) and relatively high in the Business Services, Other Services, and Manufacturing sectors (42 per cent, 40 per cent, and 36 per cent respectively). All other sectors performed below average in terms of services innovation, however the Construction sector performed sharply lower than average, at 7 per cent of SMEs reporting service innovation.

Figure 7: SME employers introducing new or improved goods or services in the last 3 years

Base: all SME employers, 677

Investment in R&D (cohort C only)

SME employers were asked if their business had invested in research and development (R&D) in the last three years. 20 per cent of SME employers had invested in R&D in the last three years, slightly higher than the previous year (16 per cent) however this change was not statistically significant.

Medium-sized business (38 per cent) were more likely than average to have invested in R&D. By sector, SME employers in Manufacturing (48 per cent), and Business Services  (29 per cent) were more likely than average to have invested in R&D. All other sectors saw less than 20% of surveyed SMEs reporting R&D investment in the last three years.

Training

47 per cent of SME employers in Scotland had arranged or funded any training (off the job training and/or on the job training) in the past 12 months, higher than the proportion in the UK as a whole (43 per cent). The figure in Scotland was statistically similar to the previous year when it stood at 51 per cent.

Off the job training is defined as training away from the individual’s immediate work position, whether on the same work premises or elsewhere. On the job training is defined as activities that would be recognised as training by the staff, that relate not only to the sort of learning by experience which could take place all the time.

Table 3 below shows the proportions of SME employers in Scotland that had arranged or funded any training in the past 12 months.

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

Base: all SME employers, 677

Figure 8 below shows the proportion of SME employers in each sector that offered any training in the past 12 months. Businesses in the Other Services (64 per cent) and the Construction sector (59 per cent) were more likely to offer any training, while businesses in the Transport/Distribution sectors (31 per cent) were less likely than average to have arranged or funded any training.

Figure 8: SME employers that offered any training

Base: all SME employers, 677 – Base minimum: Information/Communication, 18

Apprenticeships (cohort A only)   

This section specifically refers to Scottish Modern Apprenticeships, as funded by Skills Development Scotland.

Twelve per cent of SME employers in Scotland engaged with the modern apprenticeship scheme in the last 12 months. This was unchanged from the previous year (12 per cent).

Small (22 per cent) and medium-sized businesses (34 per cent) were more likely to have offered formal apprenticeships in the last 12 months, whereas only 10 per cent of micro businesses engaged with the modern apprenticeship scheme.

Apprenticeship scheme engagement was most common in the Construction sector (32 per cent).

Business plan

In 2021, 28 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 29 per cent). Small (39 per cent) and medium-sized firms (62 per cent) were more likely than average to have an up-to-date business plan.

Business support

In 2021, 24 per cent of SME employers had used information or advice on matters affecting their business in the previous 12 months, broadly similar to the proportion in 2020 (27 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). 10 per cent also cited other types of financial advice (how and where to get finance). The second most common reason for seeking information or advice was business survival and operation through the Covid-19 pandemic and beyond (19 per cent). Please note that businesses could choose more than one answer for this question.

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

Base: all that used information or advice, 196

Living Wage

In 2021, 84 per cent of SME employers in Scotland paid all their employees aged 18 or over (excluding volunteers, apprentices and interns) at or above £8.91 per hour, the Living Wage as defined by the Living Wage Foundation at the time the survey began. This is an increase from 76 per cent overall in the previous year. 15 per cent of SME employers did not pay the Living Wage to all their employees, down from 19 per cent in 2020. Small (75 per cent) and medium-sized firms (79 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 £8.91 per hour for the 2021 survey.

Base: all SME employers, 677

By sector, SME employers in the Construction (99 per cent), Business Services (93 per cent) and Administrative Services (93 per cent) sectors were more likely than average to pay the Living Wage. Businesses in the Transport/Retail/Distribution sector (74 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, 677 - Base minimum: Information/Communication, 18

Scottish Business Pledge

In 2021, 2 per cent of SME employers surveyed in Scotland were signed up to the Scottish Business Pledge. A further 13 per cent were aware of the Scottish Business Pledge but not signed up, while the vast majority were not aware of it (84 per cent).

Engagement with local community

62 per cent of SME employers in Scotland considered their business to be actively involved in their local community, this is statistically significantly lower than the prior year (69 per cent). Small firms were more likely than average to consider their business to be actively involved in their local community (73 per cent).

Prompt Payment Code

Of those SME employers in Scotland who received trade credit, nearly half (44 per cent) engaged with the Prompt Payment Code, a significant increase from the previous year (30 per cent).

Working hours arrangements

The most common working hours arrangement was flexitime, offered by over half (56 per cent) of SME employers. Twelve per cent of SME employers offered zero hour contracts. 29 per cent of firms offered none of these arrangements to their staff. Figure 12 shows the proportion of SME employers offering flexible working hours arrangements to their employees.

Figure 12: Flexible working hours arrangements available to employees (%)

Base 2021: all SME employers, 677