More than 80% of small and medium-sized enterprises (SMEs) in Scotland believe the viability of their business is at risk over the next year, according to fresh research from legal firm Aberdein Considine. 

In a new survey, carried out by Censuswide, Scottish business owners pointed to mounting economic pressures and uncertain market conditions faced by small to medium firms in key sectors across the country. 

The study found that several factors are putting a financial strain on Scottish SMEs, including supply chain disruptions (23%), increased insurance premiums (21%), rising energy costs (21%), access to finance (20%) as well as digital transformation and technology costs (19%).

The findings suggest these challenges are being felt by businesses of varying sizes within the SME category, but despite Scottish businesses’ tech budgets being squeezed, the vast majority of SMEs (98.5%) are using AI to some degree. 

Almost half (45%) reported that their workforce extensively uses the technology, with more than 86% saying their staff are well informed about using AI.

That compares to just 1% of Scots SMEs who said that their employees are not using AI, with only 3.5% of staff not being well informed about AI.

Those businesses currently showing some reluctance might soon join their AI-powered peers, with the survey finding further digital adoption is a top area of investment for SMEs over the next year, with 47% of Scottish firms planning to put more of their capital into new technology.

Other short-term investment priorities for Scottish SMEs include ploughing more into sustainability and ESG initiatives (52%), along with commercial property (52%), and growing their workforce (39%).

Standing in the way of that growth are significant pressures from policy and taxation, with over a third of business leaders (37%) listing Scottish Government policy changes as the biggest challenge their firm faces, while 25% said the same of UK Government policies.

Respondents reported that ongoing policy shifts have created difficulties in planning and investment, suggesting a widespread concern among firms about the impact of regulatory uncertainty on their ability to grow and operate effectively in the current environment. 

However, despite citing government policy as a stumbling block, more than 75% of Scottish SMEs said that recently announced reforms to UK employment law would have a positive impact on their business, while even more (79%) said that the most recent Scottish Government budget would benefit them.

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Aberdein Considine said that the contradictory findings suggest a broad cross-section of Scotland’s SME community is currently operating in an environment they view as unstable or unpredictable over the coming year.  

“We know that businesses are facing intense financial pressures, and the fact that over 80% of firms now doubt their viability demonstrates the urgent need for targeted support, policy intervention and sustainable strategies to ensure not only their survival, but long-term resilience,” said Ritchie Whyte, partner at Aberdein Considine.

“Perhaps most telling is that more than a third of SMEs point to Scottish Government policy shifts as their biggest obstacle to growth. In practice, this means every tax or regulatory change can feel like an extra weight at a time when firms can least afford it. 

“With less than a year to the next Holyrood election, we hope policymakers will take note.”