Sector Insights

SME Business Growth in Scotland

SMEs play a vital role in the Scottish economy and there are currently over 360,000 Small and Medium-sized Enterprises (SMEs) providing an estimated 1.2 million jobs. We look at the Scottish SME landscape, including a Scottish Enterprise emerging priority area, Industry 4.0.

Published: 23/03/2018

A Scottish Government report (Businesses in Scotland, 2017*) highlights that these important businesses equate to 99% of all private sector enterprises, 55% of private sector employment and 40% of private sector turnover as of March 2017.

The report also outlines that the largest sector for SMEs is in ‘professional, scientific & technical activities’ with almost 53,000 enterprises, followed by construction with over 45,000 - together these account for 27% of all private sector enterprises in Scotland. ScotGrad partners, Scottish Enterprise and Highlands and Islands Enterprise, have increasingly focused on these areas to prioritise emerging themes.

SMEs have a stronger presence in rural areas compared to urban locations accounting for almost 80% of private sector employment in Orkney compared to 37% in Glasgow. In remote areas the largest sector for employment focused on ‘accommodation and food service activities’ showing the role tourism plays in the Highlands and Islands.

There are also positive signs for the Scottish economy, growing by 0.2% in the third quarter of 2017**. This positivity was echoed by the 2017 Q4 Scottish Chambers of Commerce Quarterly Economic Indicator results which concluded that, despite an uncertain economic environment, businesses were showing resilience. It highlighted growing optimism in manufacturing and financial & business services firms^.

However, there is a note of caution from the Federation of Small Businesses, which reports that small business confidence in Scotland dropped to near record lows in Q4 2017**.

So what is the best way to ensure SMEs have the greatest possible chance to grow and flourish in Scotland in 2018?

The answer lies in SMEs being agile as they enter unchartered waters. With an exciting period of growth on the horizon thanks to the latest wave of industrial revolution coined ‘Industry 4.0’, businesses can consider the possibilities linked to automation. Primarily, this refers to artificial intelligence with machines replacing basic tasks such as a supermarket self-scan checkout, freeing up employees to focus on projects which require skill, creativity, and intelligence. Industry 4.0 is closely linked with innovation, we wouldn’t be entering this fourth phase of industrial revolution without the pace of innovation we have witnessed, particularly in recent years.

Image of a robot

The beauty of SMEs is that they are small enough to be able to adapt how they do business, allowing them to keep ahead of the curve and be early adopters. This means the opportunities presented in SMEs are very exciting for recent graduates. With larger, established organisations, the pace of change is often much slower due to long established processes and protocols that take time to untangle.

The term ‘innovation’ is going to mean much more than ever before, especially in sectors like manufacturing. Companies willing to innovate and take existing technologies and adapt them for the future are the ones which will emerge the strongest. By embracing automation, artificial intelligence and robotics, SMEs are more than likely to continue to grow and prosper in this rapidly changing economic climate.

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^Quarter 4, 2017