Armstrong Watson: Family businesses show resilience amidst rising costs and skills shortages

Paul Dickson – CEO of Armstrong Watson
In its latest business survey, Armstrong Watson has highlighted the twin pressures of recruitment challenges and rising costs facing the UK’s family, privately owned, and owner-managed businesses.
The firm’s 2025 Family, Privately Owned and Owner-Managed Business Survey Report, its most comprehensive to date with a record 858 responses, reveals a sector demonstrating resilience but grappling with significant economic headwinds.
“These businesses are not just economic contributors; they are woven into the fabric of our communities,2 says Paul Dickson, chief executive and managing partner at Armstrong Watson. “This year’s survey highlights the resilience and adaptability of business owners who continue to innovate, invest and plan for the future – even in the face of rising costs, recruitment challenges and economic uncertainty.”
Among the key findings, recruitment remains a major challenge in Scotland, with 85% of businesses reporting difficulty hiring new talent (compared to 78% national average), and 61% citing a lack of skilled candidates among the main reasons for this struggle. In response, businesses are adapting by introducing flexible working arrangements and enhancing benefits packages, though fewer are implementing formal incentive schemes or increasing their advertising budget.
Added to this is the widespread impact of increased employment costs resulting from rises in employer national insurance and national minimum wage rates, which have disproportionately affected businesses in sectors such as hospitality, retail, and care, where more employees are on lower wages. The impact of these measures has been further exacerbated by pressure to increase pay across the board.
With increasing employment costs, it comes as no surprise that 45% of Scottish business owners state that an ‘increase in costs impacting business viability’ among the main challenges to their business growth in the next three years, after ‘having the right people in the business’, which is a concern for more than half. Despite cost challenges, however, only 23% state that they foresee ‘having sufficient funds’ as an obstacle to business growth.
The majority of survey respondents across the Border have adopted digital technology and automation, although 31% still rely primarily on manual processes, rising to nearly 40% in the agricultural and property sectors (nationally). When it comes to security regarding technology, however, many are complacent, with just under 40% ‘not concerned’ about the threat of a cyber attack on their business – mirroring the national picture.
Growth plans, for many, are either something business owners have little time to think about or remain in the mind of the business owner, with only 1 in 5 admitting to having “written their plans down and communicated them to stakeholders”.
Mr Dickson said: “Having a strategic plan not only guides long-term goals but also drives more effective short-term planning and decision-making. We are committed to supporting businesses through every stage of their journey – from growth to succession.”
“We’d like to thank each and every business owner in Scotland who took the time to share their experiences and insights. The survey is a powerful resource, reflecting the realities faced by family, privately owned and owner-managed businesses across the UK. It’s vital that the voices of business owners are heard, not just by businesses like ours but also by stakeholders, policy makers, industry leaders and across communities.”