Record investment is hitting small Scottish firms, allowing businesses to back greater growth

21/06/2023

THERE IS significant trust in Scottish businesses currently, and that’s being reflected in the level of investment capital being issued across the country. Insider UK found that smaller businesses in particular experienced high levels of financial growth last year, with £762m invested over the financial year – an increase of 37% on 2021. These cash flows allow small businesses to gently alter their business plans and broaden their risk tolerance, leading ultimately to greater growth. Given that wider economic growth is slow, this is an important factor that allows small businesses to deploy additional tools to help push their growth.

Slowing growth

Small businesses are growing, but that isn’t the case throughout the entire economic chain. As The Herald reports in their analysis of the Scottish economy, growth has sharply tapered, and manufacturing output has contracted for the first time since January. As a result, supply chains are under stress and there is a higher risk of small businesses not being paid on time. That can be deadly to the business. According to invoice finance brokers ABC Finance, in many industries there are stressors on business growth “due to delayed payment terms being commonplace and cash flow being key to success”. That being said, the impact of venture capital is helping to hedge the risk through the use of instruments such as invoice factoring, which allow businesses to borrow against their invoices, ensuring they are able to receive onward payment and continue growth.

Reduction in bills

In addition to record investment allowing greater fundamental backing from businesses for other financial tools, there have been improvements in overheads that are promoting growth. Of particular interest is a 10% reduction in rate bills, as reported by the BBC. While less relevant than it previously was to small businesses, who have moved away from brick and mortar, there will still be a significant number of these businesses who stand to gain a lot from having an easement of their overheads in the property section.

Growth on the horizon

It looks, increasingly, that national measures are improving the overall outlook for Scottish enterprises. Indeed, 76% of businesses represented by industry boards expect growth in 2023 despite the pressure of the cost of living crisis. What’s more, there’s renewed vigour within parliament to continue the ‘levelling up’ in Scotland, specifically within the former coalfields, according to a Midlothian Review of a parliamentary report. While levelling up has, up to now, been underwhelming, any acceleration of funding and schemes to improve the lot of small businesses is absolutely welcome. If a focus can be presented on improving responses within the supply chain and supporting the entire weight of the business economy, it will be a success.

It’s a good outlook for Scottish businesses – especially small enterprises. There are challenges ahead, but trust and fundamental support for the finances of these businesses is helping them to embrace growth. With further nationwide support, there’s reason to be optimistic for the future.

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