Companies cited inflation and supply chain pressures as the greatest challenges for the year ahead. However, more than half of mid-sized businesses in Scotland think they will return to pre-COVID-19 revenues in less than 12 months.

The bi-monthly Rethinking the Economy survey of 500 medium-sized businesses revealed that nearly a third (29%) of medium-sized businesses in the region intend to increase the prices of their goods or services to manage inflation and support growth.

Despite the challenges, nearly one in five companies plan to increase their headcount above pre-pandemic levels in 2022. When it comes to people, 41% of businesses fear a shortage of workers able to work the hours their business requires and 20% have offered non-monetary benefits such as additional holidays to attract and retain the best talent.

Kevin Lamb, director at BDO in Scotland, said: “The challenges facing Scottish businesses are well documented and businesses are really feeling the impact of rising costs. Inflationary pressures are set to mount further over the coming months, with energy and fuel prices key drivers of this increase, together with the volatile events unfolding in Ukraine, which will add to uncertainties being felt around the world.

“As such, a high proportion of companies are having to consider raising their own costs to manage growth. The key is to take stock of the myriad of challenges now – from supply chain to costs and staff shortages – and rethink an approach that will ensure the long-term success of the business.

“Although half of businesses have started the year behind forecasts, another third of companies are trading ahead of expectations. It is also encouraging to see the level of optimism within the Scottish business community, both in terms of the speed at which they expect revenues to return to pre-COVID levels and the fact they are rethinking the way they attract and retain the best talent in their teams.”

He concluded: “These factors will remain front and centre for businesses throughout 2022 and it’s vital for companies to continue to rethink recruitment and retention strategies to stand out in an increasingly competitive landscape.”