More than half (55%) of Scottish small to medium enterprises (SMEs) anticipate growth in their business over the next year, according to new research. Confidence and optimism have dipped slightly compared to 2024.

The findings came from the second annual Business Baseline survey, conducted by the Improvement Service on behalf of Business Gateway and partners. The survey gathered responses from over 500 SMEs, entrepreneurs and business owners across Scotland.

The objective of the Business Baseline survey is to gain insight into the opportunities and challenges faced by Scottish businesses, as well as the types of support they may require. Two new questions were added this year, covering respondents’ views on Scotland’s economy and innovation and technology in their business.

Key Findings:

• 55% of SMEs expect growth in the next 12 months

• Business confidence drops from 74% to 67%

• Only 25% feel confident in Scotland’s economy

• Concern over political and regulatory conditions rises sharply to 40%

• 58% expect to need business support and 34% financial support

• Fair work adoption and environmental planning fall year on year

Growth Expectations Remain Steady But Confidence Weakens

The survey found that 42% of businesses expect moderate growth over the next year, with an average anticipated growth rate of 36%. Businesses in the education, training and HR sectors were the most optimistic, with 68% predicting growth, while sectors such as construction and food and drink reported lower growth expectations than last year.

Overall, 67% of respondents expressed confidence in their business prospects over the next 12 months, down from 74% in 2024. Reduced confidence was more common in businesses that have been trading for a longer period. When asked about the wider economy, businesses were more cautious: only a quarter felt confident in Scotland’s economy and only 16% agreed that Scottish businesses are well prepared to meet future challenges.

Rising Costs And Political Uncertainty Remain Dominant Pressures

The survey shows that rising costs continue to be the biggest challenge, cited by 63% of respondents, while political uncertainty and regulatory changes were highlighted by 40%, up from 25% in 2024. Food and drink businesses in particular saw a substantial increase in political concern.

Demand For Support Persists

Financial and business support remain key needs for Scottish SMEs:

• 34% expect to need financial support

• 58% anticipate requiring business support

• Pre-start businesses are the most likely to need financial assistance (56%)

• Grants remain the most common type of financial support sought (61%). Business Gateway strengthened its position as the most likely source of business support, rising 25% to 78%.

Over half of respondents (56%) expect to increase their prices, although more anticipate prices remaining stable than in last year’s survey (35% vs 30%).

Innovation Welcomed, But Tech Adoption Remains Uneven

This year’s survey included new questions on innovation and technology. Most SMEs see innovation as vital to their future growth (65%) and half say they are embracing new technologies, including AI.

However, 58% say they could do more and almost a third disagree that they are currently using the latest technologies.

Environmental And Fair Work Measures Decline

Environmental and fair work practices saw a slight decline: 47% of businesses had plans in place to reduce environmental impact, down from 55% in 2024, with food and drink leading at 70%. Similarly, 63% of businesses reported adopting fair work measures, compared to 74% last year.

Councillor Gail Macgregor, Chair of the Business Gateway Board, said: "The 2025 Business Baseline survey highlights the resilience and adaptability of Scotland’s SMEs. While confidence and growth expectations have softened slightly compared to last year, it is clear that business owners remain focused on growth, innovation and building sustainable practices."

The full Business Baseline report can be accessed here