This was one of the key findings in the latest Family, Privately Owned and Owner-managed Business Survey by Armstrong Watson, which included a third of businesses who said they were “very concerned” – somewhat higher than the national average of 21%.

More Scottish businesses are also worried about cashflow, with 57% concerned about having enough to cover outgoings, compared with 49% across the country.

Businesses north of the border also cited increased costs as their main challenge impacting growth over the next three years (42%), though this is slightly lower than the national average of 44%. Staff recruitment and having sufficient funds to implement plans were also listed among the main challenges impacting growth for 39% and 33% of businesses respectively.

Across all businesses who participated nationally in the survey, 49% were also worried about the impact of the increase in the national minimum wage (NMW) and national living wage (NLW). 39% of respondents suggested the new hourly rates – NLW has increased by almost 10% and the NMW rate for under 18s and apprentices has increased by more than 21% – would affect their business, with 11% stating the impact would be ‘significant’.

The survey provides valuable insights into the challenges family and owner-managed businesses face and how they are being impacted. Running November to December 2023, 300 business owners shared their views about the impact of recruitment challenges, how they are adapting to the evolving digital world and how they plan to innovate and grow. They also shared their concerns about the impact of external pressures and the issues that will impact business growth over the next three years.

The Family, Privately Owned, and Owner Managed Business Survey – marking five years since the previous survey, and the third to be carried out by the accountancy, business and financial advisory firm – found that a third of all businesses find it “very difficult to recruit”. This is up 8% from the last survey in 2018, despite 65% making changes to help with recruitment.

On a more positive note, fewer businesses (across the country) than in 2018 said retention is an issue for them, with 37% taking action to keep staff, including 71% of those increasing salaries above inflation and just under half who have introduced flexible working arrangements.

When it comes to technology, the survey found that 22% of all businesses are using AI, while a further 11% are considering it, but more than half don’t believe it is relevant to their business.

Paul Dickson, Armstrong Watson’s chief executive and managing partner, said: “Our latest survey has revealed some critical insights into the current landscape of family owned, privately owned, and owner-managed businesses and how challenges over the past five years – the Covid-19 pandemic, labour shortages, supply chain disruptions, inflation and the cost-of-living crisis – have affected these businesses.

“The widespread impact of the increase to the National Minimum Wage and National Living Wage – which will see payroll costs increase across the board – is one key challenge faced in balancing fair wages with sustainable growth.

“The ongoing struggle with talent acquisition, despite many making changes to aid recruitment, indicates a growing challenge in the labour market but it is positive to see that the data shows businesses are taking proactive steps to retain staff.

“While AI adoption is still in its early stages with some already implementing it and others considering it, it’s clear that digital transformation is on the horizon. However, there is still work to be done and business owners will need to take action to ensure they’re not left behind.

“These findings highlight the resilience, adaptability, and innovative spirit of family owned, privately owned, and owner-managed businesses and also areas in which they might need support. Despite facing numerous challenges, they continue to evolve and adapt, demonstrating their crucial role in our economy.

“Thank you to those in Scotland who took the time to share their views.”