Rural Scotland Business Panel Survey

2. Optimism and performance

Key findings

Just over half (53%) of businesses were confident in the economic outlook for Scotland over the next 12 months, while 44% were not. Economic optimism was down on the previous wave: 42% said their confidence had decreased, while 45% said it had stayed the same and 13% said it had increased.

Almost three fifths of businesses were operating at either the same level (38%) or over and above the level (20%) they were before COVID-19. Two fifths (40%) 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 a majority of businesses.

Most (73%) businesses were optimistic about their prospects in the next 12 months, but about a quarter (26%) were not.

In terms of their current aspirations, just over two fifths were striving for growth (43%) or were content with their current level of performance (45%). Around one in ten (11%) wanted to downsize.

Current economic optimism

Just over half (53%) of businesses were confident in the economic outlook for Scotland over the next 12 months, while 44% were not (Figure 2.1).

Confidence was lower than in the previous wave (October/November 2021) when 60% were confident and 38% were not.

Variation in economic optimism

As seen in the previous wave, businesses in the Highlands and Islands were more confident (60%) than those in South of Scotland (52%) and the rest of rural Scotland (50%).

Confidence in the economy was also higher than average among:

• large businesses with 25+ staff (61%),
• those operating above the level they were before COVID-19 (70%), and
• those striving for growth (57%).

Confidence was lower than average among:

• food and drink businesses (53%),
• sole traders and microbusinesses with 0-4 staff (46%),
• those in accessible rural areas (50%), and
• those operating below the level they were before COVID-19 (56%).

Economic optimism over the past six months

Thinking about the preceding six months, 42% of businesses said their confidence had decreased while 45% said it had stayed the same and 13% said it had increased (Figure 2.2). Overall confidence^[7] has decreased since the previous wave: net confidence was -29, compared with -17 in October/November 2021.

Variation in optimism over past six months

This wave, net confidence was higher among businesses in the Highlands and Islands (-26) than in the South of Scotland (-33) and the rest of rural Scotland (-30).

Businesses more likely than average to say their confidence had increased were:

• creative industries businesses (20%),
• businesses located on islands (18%),
• those operating above their pre-pandemic levels (22%), and
• those selling to markets outside the UK (17%).

Those more likely to report decreased confidence were:

• food and drink businesses (52%), and
• those operating below pre-pandemic levels (52%).

Level of current operation

Just under three fifths (58%) of businesses said they were now operating at either the same level (38%) or over and above the level (20%) they were before the COVID-19 pandemic. Two fifths (40%) were operating below their pre-pandemic levels (Figure 2.3). Findings were in line with those seen in October/November 2021, suggesting some stability in business' recovery from the pandemic.

Variation in level of operation

As seen in the previous wave, businesses in the rest of rural Scotland were more likely to be operating below their former levels (43%) than those in the Highlands and Islands (37%) and South of Scotland (32%) (Table 2.1).

Table 2.1 – Operating level by area

Operating level in relation to before the coronavirus	Highlands and Islands (%)	South of Scotland (%)	Rest of rural Scotland (%)	Total (%)
Over and above	20	21	20	20
At much the same level	42	46	36	38
Below	37	32	43	40
Base	1,017	604	1,102	2,723

Other types of business more likely than average to be operating below pre-pandemic levels were:

• tourism businesses (61%),
• those who aimed to downsize (52%),
• those selling outside the UK (49%).

Those more likely to be operating over and above their former levels were:

• businesses with 5-10 (25%) and 25+ staff (31%), and
• those striving for growth (29%).

Businesses in food and drink (64%) and financial and business services (48%), as well as those in remote rural areas (46%), were more likely than average to be operating at the same level as they were before.

Aspects of business performance

Over the past six months, sales or turnover performance was mixed: it had increased for 30% of businesses, decreased for 38%, and stayed the same for 31%.

In the same period, employment had remained relatively stable for most businesses (68%). Exports were more likely to have decreased than increased (33% vs 9%) but had remained stable for more than half of businesses (54%) (Figure 2.4).

Variation in aspects of business performance

As seen in the previous wave, businesses in the Highlands and Islands (34%) and the South of Scotland (35%) were more likely than those in the rest of rural Scotland (28%) to report an increase in sales and turnover. Highlands and Islands businesses were also more likely than average to report an increase in employment (16%) (Table 2.2).

Table 2.2 – Aspects of business performance by area

Aspects of business performance	Highlands and Islands	South of Scotland	Rest of Rural Scotland	Total
	% saying 'increased'
Sales or turnover	34	35	28	30
Employment	16	12	11	12
Exports	11	7	8	9
Base (All businesses for whom each applied in each area)

Variations in sales or turnover:

• Tourism businesses were more likely to report a decrease (56%).
• Food and drink businesses were more likely to report stability (45%).

Variations in employment:

• Tourism businesses were more likely to report a decrease (31%).
• Those operating above pre-pandemic levels were more likely to report an increase (29%), while those operating below former levels were more likely to report a decrease (37%).

Variations in exports:

• Tourism businesses were more likely to report a decrease (31%).
• Those operating above pre-pandemic levels were more likely to report an increase (22%), while those operating below former levels were more likely to report a decrease (57%).
• Those selling to markets outside the UK were more likely to see either an increase (15%) or a decrease (45%).

Future prospects

Around three quarters of businesses (73%) were optimistic about their prospects in the next 12 months, while 26% were not (Figure 2.5). Businesses were slightly less optimistic than in October/November 2021, when 77% were optimistic.

Variation in optimism

Optimism was higher among businesses in the Highlands and Islands (77% optimistic) and in the South of Scotland (77%) than the rest of rural Scotland (71%).

Other businesses more optimistic than average were:

• financial and business services (79%),
• large businesses (25+ staff) (85%),
• those operating above their pre-pandemic levels (91%), and
• those striving for growth (80%).

Businesses which were less optimistic than average included:

• food and drink (35% not optimistic),
• those in accessible rural areas (30%), and
• those operating below pre-pandemic levels (42%).

Growth aspirations

Similar levels of businesses were striving for growth (43%) and were content with their current level of performance (45%). Around one in ten (11%) wanted to downsize (Figure 2.6).

Variation in growth aspiration

Growth aspirations were similar across the three regions. However, those in the South of Scotland were more likely to say they wanted to retain their current level of performance (Figure 2.7).

In terms of further variation:

• Tourism businesses were more likely than average to be striving for growth (53%), while food and drink were more likely to want stability (53%) and creative industries to want to downsize (16%).
• Women-led businesses were more likely to want growth (49%) than non-women led businesses (41%).
• Businesses in small towns and peripheral urban locations more likely to strive for growth (48%) but those in remote rural areas were more likely to want to downsize (14%).
• Those operating above pre-pandemic levels were more likely to aim for growth (62%), while those operating below pre-pandemic levels were more likely to want to downsize (14%).
• Growth aspirations were higher than average among businesses importing from (52%) and exporting to (54%) international markets.