The extent to which businesses are investing in new technologies and moving towards low carbon ways of working appears to be greater in the Highlands and Islands than elsewhere in rural Scotland, however the region’s workforce challenges are more marked.
These were among the findings of the latest Highlands and Island Enterprise (HIE) Business Panel survey.
The research was carried out as part of a wider rural Scotland study, in partnership with the Scottish Government and South of Scotland Enterprise.
During February and March interviews were conducted with 2,723 businesses and social enterprises - 1,017 of which were in the Highlands and Islands region.
The survey tracked business confidence, performance, operating status and optimism. It explored how companies are responding to increased costs, workforce challenges and changing markets, as well as the extent to which they are adopting new technologies and low carbon ways of working.
In the context of increased inflation, record fuel prices and supply chain issues - compounded by economic sanctions applied in relation to the Ukraine conflict - most business in the region still showed signs of recovery and resilience, with 43% 'striving for growth'.
Economic and business confidence remains stronger than the rest of rural Scotland, but has dipped slightly since the previous survey in October.
The proportion of respondents expressing confidence in the country’s economic outlook over the next year was down from 64% to 60% - 50% in the rest of rural Scotland - while those optimistic about their own prospects reduced from 82% to 77%.
Two thirds (67%) reported stable employment levels. More than half (55%) reported that exporting had remained steady, although 30% reported a decrease, compared to 11% reporting an increase.
Almost all respondents (94%) reported concerns about rising costs.
This was highest among food and drink and tourism businesses (both 98%), and those operating below pre‐pandemic levels (96%). The main source of concerns appeared to be the cost of energy (65% concerned) and fuel (62%).
Actions being taken by businesses in response to higher costs include increasing prices (54%), exploring new markets (37%), collaborating (35%) and working with new suppliers (34%).
The move towards more domestic trading appears to have continued and businesses are responding to supply chain challenges by using more local or UK suppliers. Around half of respondents (52%) were exporting outside of Scotland, down from 62% in June/July 2021, with 31% selling outside of the UK; down from 46% in the same period.
Those in the Highlands and Islands appear more likely to be using or planning to use most forms of new technology. These include low carbon technologies (41%, compared to 34% for all rural Scotland), internet of things (36% vs 34%), automation (27% vs 24%), mobile app development (26% vs 24%) and data analytics (25% vs 22%).
A similar proportion (73%) said they were actively moving towards low carbon ways of working, compared to 64% for the rest of rural Scotland. Steps include investing in premises (40%), making or updating business plans (37%), seeking external advice and support (37%) and investing in low carbon technology (36%).
Martin Johnson, HIE’s director of strategy and regional economy, said: “It is important that we gather and track data about the bigger picture of our region’s economy and the main challenges and opportunities facing companies across different sectors and locations.
“It’s been a really tough couple of years for businesses everywhere, and while Covid restrictions have lifted, they’re now facing a whole new set of challenges.
“There’s no surprise that confidence would take a hit in the current economic climate, but it’s still encouraging that it remains comparatively strong in our region.”
He added: “The findings are used to inform support strategies for HIE and our partners going forward, and we are extremely grateful to all those who took part.”
Fieldwork for the next survey gets under way this week, with the results expected around the end of August.
Don't miss the latest headlines with our twice-daily newsletter - sign up here for free.
