Scottish Income Tax Research

2 Business priorities, investment and decision-making

Business priorities

The most common top priority identified for their business over the next five years was growth, in terms of both turnover and the number of employees. Others reported wanting to expand their pool of customers.

Some businesses said staff retention was a priority for them, highlighting the need to grow their turnover in order to keep up with wage demands. For others, their priority was to maintain their current position in terms of turnover through keeping their customers happy through the level of service they provide and keeping their employees happy.

A few businesses said technology advancements was a priority for them, in particular making use of AI tools.

“We want to continue to invest in our talent but better support that talent with the new technologies which are available. So we see that as quite an important area for investment and the technologies required to… I mean you'll have heard this adage that you may not be replaced by AI but you may be replaced by someone using AI.” - Large business; Professional, Technical and Scientific Services (operating in Scotland and the rest of the UK)

Recent investments

Several businesses had made significant investments in their business over the last five years. Most commonly, these were capital investments. Specific examples cited included businesses buying a new office or purchasing a new fleet of vans.

“In the last 12 months we have invested £3 million in a new office, that would be significant for us given our turnover.” - Large business; Professional, Technical and Scientific Services (operating in Scotland and the rest of the UK)

A few businesses in Professional, Technical and Scientific Services, and Finance and Insurance, said they had acquired one or more other businesses in the last five years; and one large professional services firm reported they had bought seven companies over the last five years.

One Medium business in Professional, Technical and Scientific Services explained that they had spent significant amounts of money over the last five years using recruitment agencies in order to source skilled staff.

“Over the last five years is we've spent quite a significant amount of money with recruitment agencies. You know, trying to source skilled staff and some of that's been pretty expensive. You can pay up to like twenty thousand pounds to a recruitment agency to try and recruit somebody. So that's been quite significant.” - Medium business; Professional, Technical and Scientific Services (operating in Scotland and the rest of the UK)

A couple of businesses said they had expanded outside of Scotland, opening offices in England.

“We're traditionally a Scottish business; that's our roots, you know, 65 plus years, very much Scottish-based. Over the last few years, since 2017, we've expanded into England by quite a way, and that's our direction of travel, starting to expand south of the border.” - Large business; Professional, Technical and Scientific Services (operating in Scotland and the rest of the UK)

The main drivers of investment decisions tended to be a desire for growth, as well as keeping up with the competition. Decision-making

Internal factors that drive decisions

The most common internal factors that drove investment decisions were the needs of the business, as well as its capabilities in terms of cashflow and staff capacity.

Having buy-in from staff was deemed to be important; having a collective will and desire to achieve what the business wants to do.

“I think the most important internal factors for us would be having the skill set to deliver what it is we want to do. Our existing people need to deliver it. The most important thing I think is buy-in. You need people to believe what we're going to do next is something we can all achieve, and they want to achieve it.” - Medium business; Professional, Technical and Scientific Services (operating in Scotland and the rest of the UK)

Generally, businesses that operated in both Scotland and other parts of the UK said that their decisions on investment would not differ depending on site location. The same considerations would apply; however, decisions may end up differing based on the needs or capabilities of a particular site.

External factors that drive decisions

The most common external factor that drove investment decisions was the wider economic outlook, for example business confidence and the price of goods and services. Some businesses said taxation and regulation were other considerations that would come into play. For example, tax changes could lead to increased costs for the business which would impact decisions. Meanwhile, businesses need to ensure they keep up to date with any changes in regulation. For example, one business explained that contractors are now required to have a trade specific CSS card, even if they have been working in the industry for many years.

“Now everyone needs a trade specific CSS card to think and they need to get their qualifications, even if they've been painting for 40 years and they need to get, they need to show that, which before it wasn't like that, so I mean that is, we do have to think about that becoming more difficult, and obviously if you want to win jobs with bigger contractors you need to keep up to date with all of this.” - Medium business; Construction and Engineering (operating exclusively in Scotland)

A few businesses said they would consider the needs of their clients or customers when making key decisions and try to take on board any feedback.