FSB survey finds more than half of small firms aim to grow within two years, but rising costs, tougher regulation and finance gaps risk stalling momentum
More than half (56%) of Scotland’s small businesses plan to expand over the next two years, yet escalating operating costs and tightening regulation are emerging as the biggest brakes on growth, according to new research from the Federation of Small Businesses (FSB).
The survey of 478 Scottish SME owners (27 January–21 March) highlights a mixed picture: confidence is edging back—48% reported rising turnover last year versus 32% who saw declines, with profitability improving to 62% from 57% in 2023—but structural challenges persist.
Key pressure points
- Costs and regulation: Business costs are the top barrier (cited by 52%), while 40% point to increasing regulatory requirements. One in seven firms spends at least a full working day each week on compliance paperwork, up from 12% two years ago.
- Access to finance: Nearly a third (31%) say limited access to funding is holding back growth plans—up from 23% in 2023—suggesting a widening finance gap as firms seek to invest.
- People and capacity: Staffing pressures have eased somewhat, with 63% saying they had enough staff last year, but the strain has not disappeared: 18% reduced services and 7% cut opening hours due to shortages. Concerns about sustaining consumer demand and paying competitive wages remain.
- Public procurement: Engagement is low and falling—77% have never tendered for a public contract (71% in 2023). Of those who have, 73% described the process as complex (up from 66%).
- Late payment: More than half experienced late payments in the last year, with 86% of delays attributed to private-sector customers.
- Net zero: A majority (56%) have taken steps towards decarbonisation—such as improved insulation or low-emission heating—yet 62% say support for managing the transition’s impact is insufficient.
FSB Scotland chair Guy Hinks urged policymakers to keep small firms front and centre when shaping economic measures. “It is vital that all levels of government keep tightly focused on the needs of small businesses, and the pressures facing them, when they are developing new policies,” he said. He called for improved access to finance at UK level and Scottish Government targets to increase public spending with local firms. Hinks also pressed councils to weigh business concerns when considering visitor levies or congestion charging.
While staffing challenges are easing overall, availability of local workers remains a notable constraint in the Highlands and Islands, affecting 44% of small businesses there. Sectorally, the strongest turnover gains were reported in financial and insurance services; professional, scientific and technical services; and education—where more than 30% of firms posted larger increases.
Bottom line: Growth appetite is back, but without action on costs, finance and red tape—alongside reform of public procurement and late payment practices—Scotland’s small-business expansion plans risk losing momentum.
