High costs and inability to expand business are stifling Scottish company growth – BDO finds

27/02/2024
Martin Bell (BDO)

HIGH costs and difficulty expanding their business continue to stifle growth for Scottish companies, according to new data from accountancy and business advisory firm, BDO.

BDO’s latest bi-monthly Economic Engine survey of 500 mid-sized businesses has revealed that cost pressures will remain a significant challenge for companies over the next six months, with 44% of businesses concerned about higher operational costs, including rent, energy bills and the cost of borrowing. 

Meanwhile, 35% shared that they will struggle to expand their business in the coming months, through entering new markets or increasing their physical footprint. 

Ahead of next month’s UK Spring Budget, nearly a quarter of Scottish businesses (23%) are calling on the UK Government to address ongoing issues around investment in government support for businesses, such as increased HMRC resource. 

The survey showed that 23% of businesses in Scotland are calling for better access to private capital and government grants. 

Martin Bell, head of tax for BDO Scotland, commented: “In what could be the last UK Budget before a general election, the Government has an opportunity to place growth and the interest of businesses at the centre of its announcement. 

“Scottish businesses have continued to call on the Government to act with greater purpose on key areas such as access to capital. Complexity around tax remains a challenge for businesses and they want to see more Government resources to help businesses in the mid-market, including within HMRC.  Further increases in Scottish income tax will kick in from April and businesses may need to pay more to attract or retain talent, so support in other areas to ease that burden would be very welcome.” 

Despite the calls for reform, businesses in Scotland do not anticipate a reduction in corporation tax soon as the rate increase from 19% to 25% only took effect last April, with 52% believing the overall tax burden on their business will remain the same between now and 2025/26, and 35% anticipating that it will rise. 

James Paterson, tax partner at BDO in Scotland, added: “Encouragingly, the appetite for growth from Scottish businesses remains strong. Our research shows the key to growth for many businesses over the next six months will include workforce improvements, business investment, and expanding internationally. 

“There’s no doubt that trading conditions remain difficult. However, with the right support from the Government mid-sized companies in Scotland will continue to be the driving force behind the UK’s economic recovery.”

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