Scottish Economy

Scottish firms remain resilient, but investment is needed for stronger growth in the future

Launched in 1998 and now in its 25th year, the Scottish Business Monitor is one of Scotland’s preeminent trackers of business sentiment and activity. The quarterly monitor is published weeks in advance of national statistics, allowing the temperature of the economy to be taken closer to real-time.

The Scottish business survey is compiled by the Fraser of Allander Institute, an independent economics research institute at the University of Strathclyde, and is produced in partnership with Addleshaw Goddard, an international law firm.

In celebration of 100 business monitors, the Institute today published analysis of the past 25 years of business in Scotland, highlighting how Scottish firms have coped with significant changes in the economic landscape.

The latest findings show that business sentiment fell to a 25-year low at the start of the COVID-19 pandemic in 2020, significantly lower than that felt during the Great Financial Crisis.

While exporting levels have recovered since the lowest rate recorded by the monitor in 2020, the net balance of firms reporting an increase in current and expected export activity remains well below zero as of Q4 2022.

Additionally, the share of firms reporting increased costs reached their highest levels on record towards the end of 2021 and throughout 2022. In the Institute’s most recent quarterly monitor for Q4 2022, published in January, they found that 90% of firms surveyed had seen their costs increase on the year, with just under half reporting that they expected to reduce operations in 2023 due to higher energy bills.

However, the latest quarterly results found that businesses are increasingly taking steps to tackle the current energy crisis, with more than 60% of firms reporting that the energy crisis has encouraged them to speed up making energy-efficient improvements.

This is just one of many times the business monitor has captured resilience among Scottish firms. At the start of last year, the Institute found that 40% of businesses agreed that the pandemic had accelerated their plans to make a major part of their business model digital.

But, while Scottish businesses have repeatedly demonstrated their resilience, it is crucial that businesses are not just staying afloat but that investment is made for future growth.

Since 2014, new capital investment made by Scottish firms has been weak, and despite recovery from the record lows seen in 2020, business investment has fallen consecutively each quarter since Q4 2021.

Professor Mairi Spowage, Director of the Fraser of Allander Institute, said: “Scottish firms have had to weather a number of storms over the past 25 years, and their resilience is once again being tested as they navigate through the current cost-of-doing-business crisis.

“Concerningly, our latest findings show consistently low levels of export activity and business investment, which are key drivers of productivity. While business resilience has been shown time and time again, Scottish businesses need support to secure longer-term business and economic growth.”

Alan Shanks, Head of Scotland at Addleshaw Goddard, said: “This is a fascinating report that demonstrates in detail how Scottish businesses have coped with unprecedented technological change and economic upheaval over the past 25 years. The Scottish Business Monitor launched in the same year I began my legal career and having worked closely with Scottish businesses of all sizes throughout this period I have seen first-hand the collective strength they have shown. The Scottish business community will need to show continued resilience to deal with the numerous uncertainties currently facing it.

“This kind of analysis is crucial to understanding the long-term direction of travel of the Scottish economy and identify the key challenges and opportunities for our businesses – which policymakers, investors and advisers including Addleshaw Goddard can then help them meet head on.”

Read the full report here.


Kate is a Knowledge Exchange Assistant at the FAI working across a number of project areas. She is currently studying for her MSc in Economics at the University of Edinburgh and has a bachelor’s degree in Economics from the University of Strathclyde. Kate is also the Outreach Coordinator at the Women in Economics Initiative which aims to encourage equal opportunity and improve representation in the field.

Atika Dalwai

Atika is a student in the MSc Economics and Finance program at the University of Strathclyde and has a bachelor’s degree in Commerce (Financial Accounting and Auditing) from the University of Mumbai. She has previously worked as a Staff Accountant at B S R & Associates LLP (a KPMG network firm in Mumbai, India).

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.