The UK is in an economic recession. The cost of living crisis, including the massive rise in energy prices. Trade barriers due to leaving the World’s largest free trade market – the European Union. All of these factors and more are leading to a decline in business growth.

The Scottish Government launched a strategy back in March 2022 ‘Delivering Economic Prosperity’ based on the aim of a ‘Wellbeing Economy’. The politicians may have been replaced but the strategy is still there. How will Scotland fare in its ambitions with the challenges it faces of an ageing population and the limits of devolution with the key levers of the economy held by the UK Government ?

In a recent report produced by the Global Entrepreneurship Monitor (GEM)  the overall quality of the UK entrepreneurial environment in 2020 was rated as just satisfactory, with a score of 5.0. Since then, that overall quality score has declined slowly each year. The 2023 score of 4.6 places the United Kingdom 22nd of 49 economies.

Mark Hart, Professor of Small Business and Entrepreneurship, at Aston Business School and lead of GEM UK explained:

“Permanent non-borrowers remain a significant proportion of the SME population (31%) and small business leaders still complain that a lack of finance can hinder their growth ambitions and that they are still unsure of how to access appropriate finance. We need to work harder on improvements to the all-round financing ecosystem integrating leadership and management support with a full range of suitable financing along the finance escalator.

“While start-up rates in the UK are at an historical high the proportion of businesses that are growing is declining and the weaknesses in some aspects of the entrepreneurial ecosystem may be part of the explanation.”

During the Covid lockdown many businesses adapted and some took the chance to change permanently how they delivered their services. Sadly many were unable to keep going, due to rising costs and loss of customer engagement. Some returned to ‘business as usual’ and getting rid of the strategies they had put in place for the pandemic. Others retained those changes and now do business differently aware that global issues like climate change and future pandemics require change.

The UK, however, is struggling and in recession. Household incomes have not kept pace with the rising costs of the basic needs of food and energy. The cost of living crisis has hit everyone, but especially those on low/middle incomes, and those who rely on welfare payments – including the state pension. When people are faced with choices of to heat their home or to feed their families – the conditions for would be entrepreneurs wishing to start up or expand their business, is a risky one.

The GEM report also highlights the role of education in the promotion of entrepreneurship.

Professor Sreevas Sahasranamam of University of Glasgow Adam Smith Business School, and one of the co-authors of the GEM Global Report 2023/24, said:

“There is an urgent need for entrepreneurship education to become more mainstream in schools and higher education institutions in the UK. Globally, it is important to realize that skills imparted through entrepreneurship education such as creativity, innovation, experimentation and growth mindset, and overcoming fear of failure are going to be fundamental in a world where disruptive technologies are evolving at a breakneck pace.”

The highest levels of entrepreneurial activity are in the Latin America & Caribbean region according to the GEM report. For women entrepreneurs Fear of failure remains a formidable obstacle to new startups. “The biggest perception gap was in the United Kingdom, where 63% of those women seeing good opportunities would not start a business for fear it might fail, compared to just 44% of men. ” GEM Report

The Scottish Government is spending increasing amounts of money on mitigating the effects of UK Government policies on the most vulnerable in our society, but also on our key institutions like our National Health Service. A limited pot of money leaves little for expenditure on growth. Scotland is abundant in its natural resources and the potential it has in the renewables energy sector. How much control it will have over those is doubtful if the exploitation of our land and sea is given over to non-Scottish based interests within a limited constitutional framework.

Fiona Grahame