Interest rates, Brexit, recruitment - the triple headache keeping Scottish business owners awake at night

The report by finance firm Novuna Business Finance also reveals that concerns about economic volatility, tax and interest rates have peaked this quarter. Its findings show that three-quarters of Scottish small business owners are experiencing sleepless nights, with market volatility remaining their top concern. The proportion of businesses expressing worry about this reached 44 per cent in the first quarter of 2024, up sharply from 26 per cent two years ago and also exceeding the UK average of 35 per cent this quarter.

Despite the latest forecast from the Office for Budget Responsibility (OBR) suggesting that consumer price inflation is set to fall below the Bank of England’s 2 per cent target in the next few months, the effects of inflation peaking at 11.1 per cent over the previous 18 months have continued to impact the outlook for small business owners. The latest Novuna data shows that, along with general economic volatility, the proportion of Scottish small business owners kept awake by concerns over interest rates has peaked this year, rising from 24 per cent last year to 32 per cent. Again, this figure is notably higher than that of the rest of the UK, at 21 per cent.

Perhaps unsurprisingly, given these circumstances, the proportion of businesses struggling to manage their cash flow has risen over the last year, from 15 per cent to 23 per cent, making it one of the top three concerns this year. Additionally, Scottish small business owners were more likely than their counterparts in other parts of the UK to be kept awake by worries over the impact of Brexit on their business (19 per cent versus a 12 per cent UK average), recruiting staff (15 per cent versus 9 per cent) and the effects of unpredictable or extreme weather (15 per cent against a 6 per cent UK average).

Confidence levels among Scottish businesses remain robust this quarter, however, with 31 per cent indicating they anticipate either modest or significant growth in the coming three months. This marks an improvement from the last quarter (23 per cent), though it is slightly behind the UK average of 33 per cent. Mirroring this trend, the proportion of businesses anticipating a decline has slightly decreased to 15 per cent - down from 17 per cent in the last quarter.

Joanna Morris, head of insight at Novuna Business Finance, said: “Small business owners in Scotland might be mildly relieved by the recent stabilisation of inflation rates, but it goes without saying that the long shadow cast by the previously high rates and market turmoil witnessed over the past 18 months has had a monumental effect on their outlook and operations. As the backbone of the economy, small business owners find themselves in a relentless battle against rising costs and unpredictable market conditions, making the task of forecasting and managing their financial futures for the long term nigh on impossible. Leaders are crying out for a period of steadiness, predictability, and above all, certainty.”

Confidence among Scots firms gains pace in January after dip at end of 2023