82% of Scottish business leaders concerned over tax divergence with rest of UK

IoD director general Jonathan Geldart and chair of Aberdeen and Grampian branch Sarah Downs.

NEW figures published yesterday (25 March) by the Institute of Directors (IoD) Scotland show the state of play for Scottish businesses in 2024.

The annual IoD ‘State of the Nation Directors Survey’ asked cross-sector leaders from businesses of all sizes  for their current position on a range of issues facing Scottish firms.

The 2024 survey has highlighted new concerns for leaders over the additional tax band announced at the Scottish budget in December 2023.  The introduction of a sixth tax bracket, compared to the rest of the UK’s three, means those earning over £75k annually will be taxed at a rate of 45% as of 6 April 2024.

Of the 82% who expressed concern over this further divergence with the UK, nearly 40% (39%) noted that staff recruitment was likely to be impacted the most; 34% said employee’s choice of location would be a concern, and 27% are worried about the impact on inward investment.

While 61% of members said they have the right number of skilled people for current jobs (2023:54% ),  only half (54%) reported that they were confident of being able to recruit sufficient skilled staff in the next 12 months (2023: 57%)

Catherine McWilliam, Nations Director – Scotland at the IoD, commented: “The skills gap continues to be a key concern for our members. Future recruitment and staff retention are key when business planning, and our data shows business leaders think that the introduction of the new tax band in Scotland will make things even more difficult for them. Responses show that leaders clearly see Scotland’s tax regime as yet another barrier to attracting and retaining talent – and encouraging investment.”

Results were more positive across other key areas, with 69% of respondents stating their intention to grow in the next 12 months. Employment and cybersecurity were identified as key priorities for the next five years, and there is real appetite for embedding AI tools into businesses, with 80% of respondents feeling optimistic about opportunities, and 46% noting that AI is already being used within their organisation.

When it comes to Scottish Government economic policy, 76% of respondents felt there has been insufficient attention to growing the economy in the long term, while 50% of members need more support to meet the country’s Net Zero ambitions.  

Catherine McWilliam continued: “Compared to 2020, today’s business landscape is very different.    Leaders have an abundance of opportunities to better their businesses through AI, Net Zero, Fair Work, inclusivity, and diversity, and many of them are keen to tackle these areas alongside working towards growth.

“But these areas are at the risk of being seen as ‘nice to have’, remaining simply as ambitions, if we don’t get the fundamentals like access to skilled workers and policy implementation right. Business leaders need to be able to build solid foundations upon which they can focus on policies for the betterment of their communities, and society as a whole. 

“Collaboration is key – by creating clear channels of communication and a meaningful opportunity to engage with decision makers about the challenges facing businesses, we can create a thriving economy that will attract talent and investment from the rest of the UK – and further afield.”

The 2024 State of the Nation Directors Survey was open to responses from members of the Institute of Directors in Scotland from 22nd January 2024 until 4th March 2024. In that time approximately 180 directors responded to the survey. No responses were disqualified from inclusion.

The full report can be downloaded here

The latest stories