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Businesses in the Highlands and Islands are being more cautious about investment in the desire to remain debt free, while many have reported increasing costs.

This is according to a report published today (10 October) by HIE on its most recent quarterly Business Panel survey.

Other findings include increasing recognition of the importance of free movement of people across the EU and access to the single market.

There has also been a slight increase in economic confidence among businesses in the region, as well as solid performance levels and high degrees of optimism.

This is the fifth in a series of quarterly surveys commissioned by HIE and carried out by Ipsos MORI. It took place between 7 July and 14 August and a thousand businesses throughout the region took part.

Around half (48%) of businesses said they had invested in the past year, with larger businesses and food and drink companies most likely to have done so. However, businesses generally remain cautious about future investment, with almost two thirds (63%) saying they are unlikely to invest in the next two years.  As in 2016, a desire to remain debt-free was the main reason given.

A high proportion of businesses (88%) had experienced an increase in costs relating to goods imported from outside the UK (72%), utilities (68%), goods sourced from within the UK (61%), labour (55%), business rates (36%), exports (29%) and premises (25%). 

Most businesses have responded to increasing costs either by absorbing them internally (48%), increasing the price of their goods/services (11%), or a combination of both (39%).

The proportion of respondents who felt the free movement of people was important to the Scottish economy overall was up from 75% to 79%. Membership of the single market was deemed important to the Scottish economy by 74% of respondents, up from the previous survey’s 69%.

Fifteen per cent of respondents said their confidence in the Scottish economy had increased over the past six months. This is up four percentage points on the last survey. The proportion of those saying confidence had decreased was down six percentage points to 32%.

The majority of businesses (79%) reported good (39%) or steady (40%) performance over the past year.  Businesses are generally optimistic (78%) about their prospects for the next 12 months and 89% anticipate growth (43%) or stability (46%) in the next year or so.

As previous surveys have shown, the more positive and optimistic tend to be larger businesses of 25 or more employees, and those in the tourism sector. Financial and business services companies in particular appear more likely to be fairly optimistic, while energy related businesses anticipate substantial growth in the next year or two. Smaller firms and companies in the food and drink sector tended to be less optimistic.

Carroll Buxton, HIE’s director of regional development, said: “The optimism, confidence and solid performance levels reported by most businesses is encouraging, particularly in light of the uncertainties they face. These uncertainties are however also affecting how businesses plan, particularly in relation to future investment.

“As we move forward it is more important than ever to support and invest in key growth sectors, and market the region globally to maintain the flow of inward investment.

“We are extremely grateful to all those who have taken part in the survey. They have provided some really valuable feedback and detailed insights into the challenges and opportunities facing businesses in the region. This informs the public sector and the Scottish Government on how support should be tailored to best meet the region’s needs.

She added: “The next panel survey gets underway around the end of October and we would encourage panel members to take part.”

The HIE Business Panel survey findings are shared with Scottish Government and other partners to ensure they are kept informed of the issues faced by the Highlands and Islands business community.

The report is available at www.hie.co.uk/businesspanel

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