Signs of economic recovery in Highlands and Islands

Signs of economic recovery in Highlands and Islands

Carroll Buxton

There are signs of emerging economic recovery and renewed optimism in the Highlands and Islands, according to the latest Business Panel survey undertaken in the region.

More than half (57%) of businesses in the Highlands and Islands are now operating at pre-pandemic levels or beyond.

Two-thirds (67%) have expressed confidence in the region’s economic outlook for the next 12 months, up from just 37% in October 2020.



Commissioned by development agency Highlands and Islands Enterprise (HIE) and carried out in June this year by Ipsos MORI, the survey questioned more than 1,000 businesses on topics including performance, confidence, skills and viability.

Most (93%) respondents were confident in their own ongoing viability, up from 84% at the start of the year. Four-fifths (80%) were optimistic about their prospects over the next 12 months, compared with 75% pre-pandemic.

Almost all businesses were confident in their abilities to adapt to ongoing restrictions (93%), to changes in customer demands (95%), managing cash flow (90%), and remaining competitive (91%). Confidence was however lower in their abilities to recruit required skills (59%), accessing new markets (63%), and accessing external finance (66%).

Two-thirds (66%) reported relatively stable employment levels in recent months, and most had the employees they needed.

Almost three quarters (71%) had changed their ways of working in responding to the pandemic. While 43% were keen to return to their previous ways, 28% had embraced the changes and wanted to maintain them.

The main actions taken in response to changes included doing more online, using cash reserves and collaborating more.

Meanwhile, almost half (44%) of respondents perceived the UK’s exit from the European Union as having a negative impact on their business, while 11% perceived this as positive.

The majority (89%) said they were able to access the goods and services they required, however 84% reported issues in doing so. High or increased costs were cited by 70% of businesses, 65% cited delays and 35% said getting the required volume was problematic.

Businesses were most optimistic about selling within the UK and least optimistic about sales to the EU, with 40% of exporting firms experiencing issues in doing so.

There were also challenges in retaining required workforce levels. Of those with fewer staff than required, the most common challenges reported were a short supply of skills (49%), location (44%) and lack of accommodation (40%).

Businesses in remote rural areas were more likely to cite location (51%) and lack of accommodation as challenges (51%). Food and drink and tourism businesses appeared particularly concerned about accommodation as a recruitment challenge, as well as perceived lack of career prospects and unappealing working patterns.

More than a third of businesses also had concerns about there being fewer candidates to fill permanent (38%) and temporary (33%) vacancies.

Decreases in workforce were more common among businesses in tourism (34%) and creative industries (27%), both of which have been among the hardest hit sectors.

Other than financial viability, the top three priorities for businesses in the coming months were cited as ensuring employee wellbeing (42%), growing the customer base (39%) and creating or sustaining jobs (34%).

This is the 19th Highlands and Islands Business Panel survey commissioned by HIE since 2014. The findings have been used to inform policy and decision-making on how best to support businesses in the region. HIE is now working with the Scottish Government and the South of Scotland Enterprise agency to extend the survey to cover all rural Scotland.

Carroll Buxton, HIE’s interim chief executive, said: “As always, we are extremely grateful to all those who took part in the survey. Once again, they have provided some extremely valuable feedback and detailed insights into the challenges and opportunities faced by businesses in the region.

“We already know that the Highlands and Islands region has been disproportionately affected by both the pandemic and the UK’s exit from the EU. The early signs of recovery coming across in this survey reflect the high levels of innovation, flexibility and entrepreneurship that many of them have shown during the most trying of times. Their resilience has been tested to the extreme and having weathered that storm will have helped boost confidence in many instances.

“This survey also shows what areas of operation businesses are finding most challenging, for example the issues around imports and exports, skills and accommodation. These are areas that we as the development agency will need to look at with our partners to make sure our resources and support programmes are targeted to best effect.”

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