Tuesday September 2nd 2025
Chair for Federation of Small Businesses Scotland, Guy Hinks
Written by Midlothian View Reporter, Liam Eunson
More than half of Scotland’s small businesses plan to expand in the next two years but rising running costs are a significant threat to their ambitions, new research by the Federation of Small Businesses (FSB) reveals.
FSB Scotland today publishes its latest Big Small Business Survey, offering the most comprehensive picture available of the aspirations and challenges of the country’s 350,000-plus small businesses.
The report also reveals staff shortages have forced one in five Scottish small businesses to cut the services they offer their customers over the past year.
A lack of access to finance and the growing regulatory burden are also highlighted as significant issues for Scotland’s small businesses, which collectively turn over £93bn annually and employ 900,000 people.
Guy Hinks, FSB Scotland Chair, said:
“Scotland’s small businesses are resilient and resourceful with the undoubted potential to drive the economic growth everyone recognises the country needs.
“However, the ever-rising costs of operating a business risk having a deadening effect on those growth ambitions. 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.
“We have been calling for a number of measures which would support small businesses and local jobs, such as the UK government taking steps to improve access to finance and the Scottish Government adopting targets for increased public spending with local firms.
“It is also vital that Scotland’s councils listen to the concerns of local businesses when it comes to introducing so-called tourist taxes and considering new measures such as congestion charging.”
The main findings of the Big Small Business Survey include:
Growth ambitions
More than half (56%) of small businesses plan to grow in the next two years. Rising business costs (cited by 52%) and the impact of the cost of living crisis remain the biggest obstacles to their growth plans.
Lack of access to finance is a growing and significant challenge, cited by nearly a third (31%) of respondents as a major barrier to growth in 2025, up from a quarter (23%) in 2023. Increasing government regulation of business was highlighted by two fifths (40%) of small businesses.
One in seven small businesses (14%) spent the equivalent of at least one full day a week – eight hours or more – on paperwork relating to regulatory compliance, an increase from one in eight (12%) two years ago.
Staff shortages
Some recruitment challenges appear to have eased, with almost two thirds (63%) of small businesses saying they had enough staff to meet their needs last year. However, challenges remain, particularly around a lack of confidence in consumer demand being sustained and an ability to offer competitive wages.
Nearly one in five (18%) had to reduce their services, and 7% cut their opening hours, due to staff shortages in the last year.
Respondents were notably less likely than in 2023 to say an absence of local workers was a problem. However, that remains an issue in the Highlands and Islands, affecting more than two fifths (44%) of small businesses.
Public procurement
The vast majority of respondents (77%) had never tendered for a public contract, an increase from 71% in 2023.
Nearly three quarters (73%) of the minority who have tendered for public contracts described the process as complex and challenging, up from two thirds (66%) two years ago.
Net Zero
Most small businesses (56%) have taken steps to transition to Net Zero, such as installing low emission heating systems or increasing insulation. However, almost two thirds (62%) said there was not enough support available with regards to the impact the transition to Net Zero might have on their business.
Trading conditions
The proportion of businesses able to generate a profit in the last year increased to 62%, from 57% in 2023, and the number sustaining a loss decreased (from 24% to 17%).
More small businesses saw an increase than a decrease in their turnover last year (48% against 32%), with businesses in the financial and insurance services; professional, scientific and technical services; and education sectors most likely to see larger increases (more than 30%) in their turnovers.
More than half of respondents experienced late payments from clients in the last year, with the private sector being responsible for 86% of late payments.
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