Business Trends in the Highlands and Islands
Highlights
This report forms part of the Novel Insights on Scotland’s Rural and Island Economies (NISRIE) within the Scottish Government Environment, Natural Resources and Agriculture Strategic Research Programme, 2022-2027. It provides an overview of business performance and confidence among sampled firms in the Highland and Islands between 2015 and 2024, drawing on data from the Highland and Islands Enterprise (HIE) Business Panel Survey. The analysis presented in this report examines how these businesses navigated economic shocks (the Covid-19 pandemic and the UK’s withdrawal from the EU).
What were we trying to find out?
The research explores how key indicators of business performance – employment, turnover, exports, profit margins, working hours, staff training – and confidence in Scotland’s economic outlook, have evolved over the last decade. The briefing focuses on how economic shocks affect business resilience and adaptations in the sampled businesses, and their post-shock recovery pathways.
What did we do?
Data were drawn from survey Waves 2 to 27 from the HIE business panel survey, which took place between 2015 and 2024. Question responses were harmonised by recoding how businesses perceived their performance into numerical values (-1 = decrease, 0 = stayed the same, 1 = increase), enabling the computed averages to show the direction of effect. This approach provides a comparable indication of where businesses reported on improvements, deterioration or stable performance and confidence. The analysis is structured around three key periods: 2015-2019 (steady confidence and emerging challenges), 2020-2021 (economic shocks) and 2021-2024 (recovery and adaptation).
What did we learn?
Business performance and confidence across the sampled businesses in the Highlands and Islands followed a consistent pattern:
- 2015-2019: Businesses reported steady confidence and positive performance across employment, turnover, exports, profit margins and training. While some fluctuations occurred, the general trend reflected stability and resilience, with exports and turnover particularly peaking around 2018.
- 2020-2021: The onset of the Covid-19 pandemic and the triggering of Article 20 of the UK’s exit from the EU were notable economic shocks during the period. All performance indicators declined sharply, especially exports, working hours, profit margins and staff training, reflecting the scale of disruption faced by the sampled businesses.
- 2021-2024: Businesses begin to recover, with employment and turnover experiencing recovery. However, exports and profit margins remained subdued and further constrained by inflation, rising energy costs, interest rate pressures and ongoing trade frictions.
Despite these trends, the sampled businesses demonstrate resilience, adapting to a more volatile and uncertain operating environment. But the report is a reminder that resilience has a cost. Profitability, workforce development and export capacity remain under sustained pressure, and these are precisely the areas that need targeted policy attention if the region's distinctive economy is to thrive rather than merely survive.