The survey found that almost 9 in 10 (87%) of company directors polled in November had made changes​ ​to their business in response to the pandemic. At the same time, less than 1 in 5 respondents (19%) said they hadn’t made any permanent changes due to the pandemic.

A total of 42% said the changes they had made improved their organisation’s productivity, compared with 27% who said they did not.
While two thirds had made all the adjustments they intended to make, but a further fifth wanted to make more changes in response to the virus.

On balance, directors surveyed expected to ramp up investment in areas such as R&D, training and software in the year ahead, but significant minorities in each area ​said they would have to rein in spending. Overall, business leaders anticipated lower investment in buildings and machinery compared with their plans before the pandemic.

The IoD has urged the UK Government to help SMEs kick on after the pandemic by pushing ahead with infrastructure and skills spending, and improved tax reliefs​to support firms’ investment plans. It has warned that business debt and uncertain demand could hold ​ back productivity growth after the pandemic if these actions aren’t taken.

Malcolm Cannon, national director of IoD Scotland, said: “Scotland is the home of some of the world’s greatest inventors; it is no surprise that innovating comes naturally in times of difficulty. Businesses and their leaders have had to react quickly to changing restrictions, conditions and trials, and instead of shying away from the challenges, most have turned them into opportunities.

“It’s encouraging to see that investment is being made into research and development as well as training, as these are the areas that will help businesses back to growth once we emerge from the pandemic. However, many companies will be facing the burden of debt, and support to repay this in a way that won’t harm recovery would be welcomed by all.”

Tej Parikh, chief economist at the IoD, added: “There’s no overstating the challenges businesses have faced this year. However, a surge in innovation is one silver lining from this difficult year.

“Necessity is the mother of invention. Facing unprecedented restrictions, companies have had to come up with workarounds, fast. Many of these solutions – whether remote working, adapted supply chains, or moving services online – have turned out to work better than business-as-usual. As a result, some organisations may be more prone to embrace innovation going forward.

“Sadly, this doesn’t mean our long-standing productivity puzzle is suddenly solved. Entrenched challenges around skills and infrastructure still need addressed. The Government has been taking strides on these key issues for business, but there’s distance left to run.

“In the aftermath of the virus, many companies will be saddled with significant levels of debt. The Treasury will need to be ​accommodating to encourage business investment ​with tax reliefs. One thing it certainly shouldn’t be doing yet is hiking up taxes, which could snuff out the recovery.”