Scottish firms feel that Scottish government is out of touch with the business community | FAI

Just 9% of Scottish firms agree that the Scottish Government understands the business environment in Scotland, compared to 64% of businesses that disagree according to the latest Fraser of Allander Institute Scottish Business Monitor (SBM) report.

Produced in partnership with Addleshaw Goddard, the report on the second quarter of 2023 surveyed over 400 firms from across the Scottish economy in July and August.

Against the backdrop of the Scottish Government’s ‘New Deal for Business’, the Institute asked a series of questions relating to firms’ views of their relationship with the Scottish Government.

The report finds that just 8% of businesses agreed that the Scottish Government engages effectively with their sector, with 67% of firms disagreeing.

A slightly better 19% of surveyed firms agreed that if they wish, they know an effective route to influence Scottish Government policy, while 39% of firms disagreed.

The latest analysis also finds that larger firms typically disagree more strongly than smaller firms when it comes to whether the Scottish Government understands the business environment in Scotland or engages effectively with their sector.

Strathclyde University’s Fraser of Allander Institute has introduced these questions to allow the Scottish Government and the business community in Scotland to understand how the relationship between the sectors is changing. This could help assess the effectiveness of the “New Deal for Business”.

These questions will be monitored annually to report on progress.

Other key findings include:

• 80% of hospitality firms and 92% of other service activities businesses disagreed with the statement that the Scottish Government understands the business environment, the highest disapprovals of any sector.
• 86% of firms with more than 100 employees and 73% of firms with under 100 employees felt that the Scottish Government did not understand the business environment.
• 92% of other service activities, 77% of construction, and 72% of retail firms disagreed that the Scottish Government engages effectively with their sector.
• Larger firms had a higher rate of firms feeling that government engages ineffectively, with 90% of firms with 250+ employees and 72% of firms with 1-10 employees disagreeing with the statement that the Scottish Government engages effectively.
• 50% of other service activities and 48% of professional services responded that they did not know an effective route to influence Scottish Government policy, the highest of any sectors.
• Unlike previous questions, smaller businesses were more likely to not know an effective route to influence policy.

Professor Mairi Spowage, Director of the Fraser of Allander Institute, said: “These results are obviously pretty disappointing for the Government, with the vast majority of businesses not feeling that the government understands business or that they engage effectively.

However, they underline the importance of the Scottish Government resetting their relationship with business. It is therefore more important than ever that the New Deal for Business leads to changes in approach in the future.

These indicators can help us track progress over time – and hopefully see improvements in the relationship.”

David Anderson, Head of Corporate at Addleshaw Goddard in Scotland, said: “Developing the best environment to do business is essential for the economy to thrive so it’s important for policymakers to be aware of the sentiment among business leaders in this regard, the good and the not-so good. These results are very timely and speak to the frustrations that businesses are clearly feeling.

“More than anything, however, the findings emphasise the need for business and government to come together and engage more effectively – working in partnership with the business community is what the New Deal of Business is about and these figures provide a benchmark as we move forward.”

Read the full report here.

Adam is an Economist Fellow at the FAI who works closely with FAI partners and specialises in business analysis. Adam’s research typically involves an assessment of business strategies and policies on economic, societal and environmental impacts. Adam also leads the FAI’s quarterly Scottish Business Monitor.

Find out more about Adam.

Mairi is the Director of the Fraser of Allander Institute. Previously, she was the Deputy Chief Executive of the Scottish Fiscal Commission and the Head of National Accounts at the Scottish Government and has over a decade of experience working in different areas of statistics and analysis.

Ciara is an Associate Economist at the Fraser of Allander Institute. She has a broad research experience across different areas including poverty and inequality, the voluntary sector, health, education, trade, and renewables and climate change. Ciara has an MSc in Applied Economics (Distinction) and a first-class BA Honour’s degree in Economics and Finance, both from the University of Strathclyde.