Majority of firms say Scottish Government doesn’t understand business
The University of Strathclyde’s Fraser of Allander Institute said the figures show an increasingly “negative picture” in the relationship between business and government.
More than two-thirds of firms believe the Scottish Government does not understand business, a report has suggested.
According to the Scottish Business Monitor, 69 per cent of companies do not think the Government understands the business environment, while 71 per cent do not think ministers engage effectively with businesses on policy.
The University of Strathclyde’s Fraser of Allander Institute said the figures show an increasingly “negative picture” in the relationship between business and government.
The report found reforming business rates is the top priority for companies, with 34 per cent saying they would most like to see it prioritised in the upcoming Budget.
Some 14 per cent said supporting skills and training are the top priority, while income tax was the top for 12 per cent.
The survey of 200 firms across all council areas in Scotland also found signs of progress.
More than one in five firms (22 per cent) now say they know an effective route to influence Scottish Government policy, up from 14 per cent last year and the highest share since the question was introduced in 2023.
Activity improved across all six of the monitor’s key indicators in the third quarter of 2026, with sales returning to positive territory for the first time since the second quarter of 2024.
However, expectations for future sales weakened and uncertainty remains widespread.
Nearly all (99 per cent) firms said economic and business uncertainty was an important concern for them, while 93 per cent said the same of political uncertainty.
More than four in five (82 per cent) companies reported higher total costs this quarter, down from 86 per cent in Q2, with 86 per cent expecting costs to rise over the next six months.
Employee costs were the most commonly reported pressure, while energy is expected to be the main driver of cost increases ahead.
AI adoption held broadly steady, with 65 per cent of firms using AI in their operations in the past three months, following a period of rapid growth.
Meanwhile, the net balance of businesses expecting higher sales over the next six months fell from 10 per cent to three per cent – below the post-pandemic average of six per cent.
Looking to the wider economy, expectations for Scotland’s economic growth have become more divided.
Three in four firms expect weak or very weak growth in the Scottish economy over the next 12 months, although the share expecting moderate growth rose from 20 per cent to 24 per cent.
Emma Congreve, deputy director of the Fraser of Allander Institute, said: “The upcoming Scottish Budget is an important opportunity for the Scottish Government to strengthen its relationship with the business community.
“Our results show there is still some way to go, with many firms not yet feeling that government understands the business environment or engages effectively with them on policy.
“Businesses have given a clear indication of where their priorities lie ahead of the Budget, with business rates well ahead of any other area. With cost pressures still widespread, it is perhaps unsurprising that firms are focused on one of the most direct costs they face.
“No single Budget can address every challenge businesses face. But it is an opportunity to provide greater clarity on the direction of policy, make progress on some of the issues firms have identified and build a stronger dialogue between government and business.”
The Scottish Government has been approached for comment.
Comments
Want to join the conversation? Please or to comment on this article.