Scotland needs to encourage and retain medium and large businesses - BDO

The number of companies with 250+ employees remained the same at 2,295 between March 2014 and March 2015 and these businesses peaked in number in 2001 when they reached 2,345 firms and were at their lowest in 2011 when they fell to 2,230. The figures for the last 15 years have all been within 115 enterprises from the bottom to the top indicating a fairly static number of large scale companies.

These 2,295 firms generated £161,810m turnover (60.1 per cent of total turnover) and employed 934,900 people (44.3 per cent of total employees) in Scotland indicating growth in this size of business is essential for the economic future of Scotland.

Over the same period of March 2014 to March 2015 businesses employing between 50-249 rose by 2.4 per cent to 3,870 (employing 264,780 and generating £35,771m) whilst those employing between 1-49 people rose 1.8 per cent to 101,135 (employing 623,250 people and generating £57,041m).

The largest growth of 10.5 per cent occurred in the 0 employees band which has 254,045 businesses employing 284,045 employees (1.1 people per business) and generated £12,311m (4.6 per cent of total turnover generated in the year). But if you strip out the unregistered businesses in these statistics the increase is more modest rising 3.1 per cent from 61,135 to 63,035.

Martin Gill, head of BDO in Scotland, explained: “An increase in the number of enterprises is always welcome. The more businesses Scotland has the more wealth it is generating. My concern with the latest Scottish Government statistics is that the bulk of business growth has arisen in what might be termed ‘one man bands’, and unregistered businesses at that, whose turnover accounts for just 4.6 per cent of the total figure for Scotland. The reason for this increase may be to do with changes in the employment market rather than in the creation of a greater entrepreneurial culture.”

“Almost half of all employment comes from businesses with more than 250 employees and 60% of total Scottish turnover is derived from these businesses. When you include firms employing more than 50 employees the turnover from these combined businesses is 75 per cent of total turnover for Scotland.”

BDO’s own research shows that Scotland’s mid-sized businesses (firms with a revenue between £10 million to £300 million) are a thriving area of the economy, growing turnover by 63 per cent over the last five years from £32bn to £52bn.

Employment among Scottish mid-sized businesses has risen by 39 per cent (from 220,000 in 2010 to 306,300 in 2015).

Martin continued: “I hope that we are creating more entrepreneurs but we need to ensure that Scotland attracts and maintains its large scale employers and revenue generators. Many of these are multinational firms and have options to locate elsewhere. The mid-market is a jewel in Scotland’s economic crown. It should get more support from government in order help medium-sized firms become the big businesses of tomorrow. Support could come in the form of using long term lending trusts to encourage investment in mid-market businesses; zero VAT for supplies to exporters; and reducing the overseas tax barriers for UK exporters opening a new branch or subsidiary overseas”

“If you take Aberdeen city for example. You have just 240 enterprises in primary industries (which includes oil and gas) but employing 28,480 people (18.9 per cent of all people in the city) and with a turnover of £26,001m (58.7 per cent of the city’s annual turnover). The loss of any of these larger businesses will have an impact on both Aberdeen and the wider Scottish economy and the current figures only run up until March of this year missing some of the continued impact of lower oil prices.

The turnover for these businesses alone in Aberdeen accounts for 9.9 per cent of the total Scottish turnover in a year.”

Martin said: “We must ensure we have a Scottish economy which is dynamic and flexible and which is open to new developments in whatever sector. Sustaining medium and larger sized businesses in Scotland is essential both for employment and for maintaining GDP. The growth of small businesses is essential but there is a need to monitor the Scottish economy as a whole and keep a balance between the largest and smallest businesses in our country.”