Employers in the south of Scotland are taking action to protect their staff from the impact of next month’s increase in costs.

Higher employers’ national insurance contributions and a hike in the living wage, introduced in the October budget, will hit the cost base of thousands of firms.

A survey has found them divided evenly between those intending to absorb the additional staff costs (50%) and those which will hike prices (48%).

Fewer will pause or stop recruitment (29%), reduce or stop pay increases or benefits (20%) or cut staff numbers (16%).  

Ipsos – on behalf of South of Scotland Enterprise (SOSE) – interviewed 601 companies and social enterprises from across the region.

It found that 75% of employers were taking some form of action in relation to supporting their workforce, with training (54%) the top action followed by flexible working (38%) and making pay and rewards more competitive (35%). 

Almost a third (29%) did not have enough staff to fill temporary or seasonal roles and 22% did not have enough staff to fill permanent roles. 

The survey also found that more than half of businesses (59%) were either currently investing (39%) or planning to invest in the future (20%).

The number of businesses with a formal plan in place to reduce emissions has more than doubled, from 14% in March 2023 to 32% in November/December 2024. 

More than half (58%) said they needed financial support with their Net Zero aims, while 46% said they needed information about opportunities, guidance on what changes to make (46%), and access to equipment and technology (44%). 

Despite commitments to invest in their businesses, most (94%) said they had a significant financial concern.  

High and increasing costs was a significant concern for almost three-quarters (73%).

Jane Morrison-Ross, chief executive at SOSE, said:  “These are challenging economic times and it is understandable this has impacted the confidence of businesses, and appearing to influence some decisions around investment and growth.

“What is good to see is that three-quarters of businesses are taking positive action to help their workforce and more than double the number from 2023 are realising the importance of Net Zero planning. 

“We understand there are a number of challenges for the business community at this time and we remain committed to working closely with economic agencies and our other partners to realise value and provide as much financial and non-financial support as we can.  

“For example, in 2023/24 our support for SMEs in the South of Scotland amounted to £6.9million – making up 92% of the funding awarded to businesses. 

“This support aims to ensure the South of Scotland becomes the rural economic powerhouse we know it can be.” 

Adam O’Sullivan, SOSE’s lead analyst for economic insights, added: “The South of Scotland Business Panel provides an important temperature check on what current business sentiments are across the region, as well as their priorities for the future.”