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Front of HIE's building on Inverness Campus

Business survey highlights pandemic impacts and Brexit concerns

Published: 21/12/2020

Businesses in the Highlands and Islands that have not yet prepared for some of the major changes facing them as a result of Brexit are being encouraged to do so as quickly as possible.

Martin Johnson HIE director of strategy and regional economy
Martin Johnson of HIE (picture credit, Paul Campbell)

With time now very tight, the region’s businesses are being strongly encouraged to review the Brexit information, advice on the Scottish Government’s ‘prepare for Brexit’ website, where they will also find checklists and links to other resources.

The call comes from regional development agency, Highlands and Islands Enterprise (HIE), following publication of its latest business panel survey of more than a thousand firms across the region.

This showed that while most are prepared for changes to routes to market, to supply chains and to regulations and standards, around a third are still unprepared for impacts relating to intellectual property and customs procedures.

Martin Johnson, director of strategy and regional economy at HIE, said:

“The fieldwork for this survey was carried out in October, so it’s likely that more preparation work has been done by businesses since then.

“While we welcome confirmation that most businesses do seem prepared for many aspects of Brexit, it is still very concerning that a sizeable proportion may not be.

“Responding to the pandemic has understandably hampered the preparation efforts of many firms and we now have Christmas blocking out time before the deadline, but there are still useful steps businesses can take.

“The Scottish Government’s ‘prepare for Brexit’ website provides valuable information, advice and checklists to help businesses and links to other resources, as does the UK Government’s Brexit transition page.

“We encourage anyone who has not yet done so to check out these sites and do what they can between now and 1 January.”

The survey report also highlights many of the impacts that the pandemic and associated restrictions have had on the region’s businesses. It shows a very different picture from this time last year but some slight improvement in the past few months.

Four in five businesses (82%) expressed confidence in their viability over the next six months, up from 75% since the previous survey in June. However, almost a third (31%) of tourism businesses, one of the hardest hit sectors, are not confident about their future.

Confidence in the wider economic outlook has increased slightly since its lowest ever reported level in June but remains very low. More than two-thirds (69%) reported decreased confidence in Scotland’s economic outlook and 62% said they are not confident in the economic outlook for the Highlands and Islands. Tourism businesses again expressed more concern, with 82% saying their confidence had decreased over the past six months.

Although half of businesses said they were operating below their pre- COVID-19 levels, over a third (36%) were operating at much the same level, and 13% were operating over and above the level they had been. These figures compare favourably to those from the June survey, when they were 65%, 26% and 8% respectively.

Firms in the tourism (80%) and creative industries sectors (67%) are among those more likely to be operating below their pre-COVID-19 levels.

Around three-quarters of firms reported having made changes to how they work in response to the pandemic. These changes relate mainly to processes and products, use of technology and collaborating with other businesses.

In terms of political and economic uncertainty, businesses are concerned about future waves of coronavirus (95%), the UK’s departure from the EU (75%), and Scotland’s relationship with the rest of the UK (79%).

As we approach the end of the EU exit transition period, businesses remain relatively optimistic about maintaining sales levels in Scotland (50%), UK (52%), within the EU (51%) and elsewhere globally (53%).

Most felt confident in their ability to respond to changing customer demands (90%), to manage cash flow (88%), and to remain competitive in current markets (88%). They were also confident in their ability to retain staff (79%), respond to increased competition in domestic markets (77%), and deal with increased costs (73%). Confidence was, however, lower in terms of accessing external finance (54%), accessing new markets (48%) and recruiting new employees (40%).

More than half (54%) of businesses are still striving for growth and of these, three in five expect to realise this growth. Most business also reported having stayed true to the core business values of ensuring quality, strong financial performance, a good work-life balance, and minimising environmental impact.

There was strong support for government actions to prioritise climate change, with 81% agreeing this is important. Businesses generally expressed high levels of commitment to reducing their own environmental impact, with 97% anticipating taking action to do so.

Martin Johnson added:

“Once again, we are extremely grateful to everyone who took part in this survey. Their feedback provides valuable insight into the different pressures and opportunities in the region’s economy, how businesses are responding to these and what types of public sector support would be most useful to them.

“Clearly this has been an incredibly difficult year. Restrictions around the pandemic and the many changes businesses have had to make to their ways of working are seriously affecting trade, growth and preparations for leaving the EU.

“It’s certainly a very different picture than it was a year ago but despite this, we are still seeing some very welcome confidence and self-belief among many firms, and this will be a key strength going forward.”

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