Ongoing uncertainty and the pandemic debt burden taken on by many small and medium-sized enterprises (SMEs) may also be impacting on future plans, according to analysis from the Association of Chartered Certified Accountants (ACCA).
It found that the vast majority of Scottish SMEs - 92.4 per cent - are not seeking finance to grow in the next six to 12 months, compared to a UK average of 81.7 per cent.
Data from the latest edition of the ACCA SME Recovery Tracker was gathered just as the Omicron wave was starting to hit Scotland and is based on responses from accountants representing almost 1,500 clients north of the Border.
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There are further indicators of SME stagnation in Scotland as respondents report only 15.5 per cent are looking to hire new talent, while just over a tenth (11.8 per cent) expect to make redundancies next year, marginally more positive than the UK figure of 12.4 per cent.
Whilst the number of SMEs expected to still be trading in 12 months’ time has dropped by nearly 10 per cent between November and December for the UK as a whole (93 per cent in November versus 83.8 per cent in Dec), Scottish businesses seem to buck this trend, with just over 91 per cent expected to still be trading.
SMEs in Scotland were also the least likely to state they expected to require an overdraft facility, with just a quarter (25 per cent) anticipating this, compared to 50 per cent of those in Wales and 30 per cent for the whole of the UK.
While around a fifth (21.4 per cent) of UK SMEs have increased credit checks for potential customers and 30.7 per cent have put tighter payment terms in place, in an effort to stabilise their internal working capital position over the past 12 months, Scottish businesses lag behind this average.
Only 4.5 per cent of Scottish firms report increasing credit checks for potential customers, with 18.8 per cent tightening their payment terms over the same period.
Susan Love, strategic engagement lead, ACCA Scotland, said: “Given the uncertain outlook it is perhaps unsurprising that the majority of businesses aren’t seeking finance to grow in 2022 but it is a worrying trend that presents a challenge to policy makers as Scotland looks to set out its roadmap for economic recovery.
“However, it’s encouraging that accountants report that they expect 91 per cent of SMEs to remain in business over the next 12 months. As we head into a new phase of Covid-related restrictions, SMEs across Scotland will need additional support if those positive predictions are to be realised.”
Kirsty McGregor, founder of The Corporate Finance Network, which helped with the analysis, added: “As we head into another period of increased Covid-19 restrictions, I am concerned about the future of the UK SME economy.”