These findings derive from Grant Thornton UK LLP’s latest Business Outlook Tracker, which surveyed 605 mid-sized businesses across the UK, of which 51 were Scotland-based companies.

Specifically, the tracker found that 35% of Scots mid-market firms have frozen salary increases, with a further 43% planning to do so. Over half (51%) have also frozen workforce bonuses.

Scotland seems to be faring better when compared to the UK as a whole however, seeing as 52% of UK mid-sized firms have frozen salary increases, and a further 36% are planning to do so. Almost half (48%) have also frozen workforce bonuses.

Scots firms’ spending on people costs has been reined in across most areas, with 33% also reducing their headcount and 41% freezing recruitment.

This has also happened on a UK-wide level but to a higher degree, with 45% having reduced headcount and 46% having frozen hiring.

As well as tightening costs for people, many businesses in Scotland have made changes to their operations. Over three quarters (82%) have either already restructured their operations or have plans to do so.

Again, these numbers are slightly lower when compared to the 91% of mid-market firms across the UK that have done and said the same.

The research also showed that spending is being closely monitored within the market, with over a quarter (27%) of Scots businesses having reviewed their non-essential spending and a further 57% planning to do so, with the numbers on a UK-wide level varying at 47% and 42% respectively.

Across the UK, businesses are looking for solutions in a bid to improve performance amid a tightening of spending. Almost half (49%) of Scots firms have invested in productivity, efficiency, and automation, and a further 37% have plans to explore options in this area.

Over half of UK mid-sized firms have invested in performance-boosting opportunities, with a further 40% planning to do so, however.

Recommended reading

• Private Equity Into Scotland’s Mid-market Firms Cools 25% In H1 ‘23
• 40% of Scots Fintechs Uncertain About Surviving to 2024
• Gen Z Struggling to Start Careers in Tech

Speaking on the latest Business Outlook Tracker findings, Stuart Preston, partner at Grant Thornton UK LLP in Scotland, said: “While inflation is, slowly, starting to fall, it’s clear that firms are remaining prudent and closely monitoring their spend across all areas from wages to recruitment and operations.

“Ensuring they keep a close eye on their financing position and rein in unnecessary spending where possible, will help many to remain in a robust position despite the cost pressures they may be facing.

“We have also seen an increase in optimism about business’ future revenue growth expectations, which suggests that many are confident that the actions they’re taking now, or have planned, are sufficient to work through this period. Particularly as we have seen slight real wage growth for the first time in over a year which, when combined with the fall in energy costs and usage over the summer, means that consumers will have more disposable income to spend.”

As businesses continue to work through cost pressures, the tracker found that over three quarters (82%) of the Scots firms surveyed anticipate that they will need to raise additional funds over the next year, though this compared to 74% of firms on a UK-wide level.

Interestingly, instruments such as Sustainability Linked Loans (SLL), which offer more favourable terms tied to performance against agreed ESG goals, are increasingly popular with the Scottish mid-market. 71% of respondents already have an SLL in place, and 78% said they will consider one at their next debt raise or re-finance.