Resilient but Strained: Business Trends in the South of Scotland
This report forms part of the Novel Insights on Scotland's Rural and Island Economies (NISRIE) project 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 South of Scotland between July 2022 and July 2025, drawing on data from the South of Scotland Enterprise (SOSE) Business Panel Surveys. The analysis examines how businesses in the region have navigated a period of sustained economic pressure, including the aftermath of the Covid-19 pandemic, the ongoing effects of the UK's exit from the EU, and the cost-of-living crisis. The preceding report in this series focused on the Highlands and Islands, drawing on the HIE Business Panel Survey data from 2015 to 2024.
What were we trying to find out?
The research explores how key indicators of business performance - employment, sales/turnover, exports and profit margins - and confidence in Scotland's economic outlook have evolved across the South of Scotland between July 2022 and July 2025. The brief report focuses on how many businesses have shown resilience amid macroeconomic instability and what recovery and adaptation patterns are visible in the sampled data.
What did we do?
Data were drawn from seven survey waves of the SOSE Business Panel Survey, covering July 2022 to July 2025. Responses were harmonised by recoding how businesses perceived their performance into numerical values (-1 = decrease, 0 = stayed the same, 1 = increase), enabling computed averages to show the direction of effect. This approach provides a comparable net indicator of where business respondents reported improvements, deterioration or stable business performance and confidence.
What did we learn?
Business performance and confidence across the sampled businesses in the South of Scotland followed a consistent pattern across the study period:
2022-2023: Businesses entered the survey period still reacting to the effects of Covid-19 and EU exit. Net employment and business turnover declined on average, while exports and profit margins were consistently negative at the aggregate level. Confidence in Scotland's economic outlook remained negative, though it increased.
2023-2024: At the aggregate level, each performance indicator worsened, especially turnover and profit margins, reflecting the combined pressures of labour cost increases, higher energy costs and subdued consumer demand on business profitability. Confidence in Scotland's economic outlook also fell sharply, reflecting general pessimism on the wider economy beyond their own business.
2024-2025: Some form of stabilisation in performance metrics was evident in employment levels, turnover and profit margins. However, export performance continued to decline, on average. Confidence in Scotland's economic outlook showed partial recovery but remained firmly negative.
Despite these pressures, the sampled businesses demonstrate resilience, continuing to operate and adapt within a structurally challenging environment.