Scottish business leaders have warned that access to investment capital is drying up and choking the ability of companies to grow.

MFMac’s biannual survey found that almost half (48%) rate the availability of investment capital in Scotland as scarce or very scarce. Just 8% describe investment as readily available.

It means firms are concentrating on defensive strategies, such as increasing revenue (79%) and improving operational efficiencies (65%), with little headroom for growth strategies such as entering new export markets (6%) or product diversification (22%).

A flat economic outlook is the primary barrier to growth, with two-thirds (67%) identifying the uncertain economy as their biggest challenge, with more than a third (38%) calling conditions “weak”.

Official data shows that GDP per head in Scotland is estimated to have grown by just 0.2% during Q1 2025, while annual real GDP per head grew by 0.3% in the whole of 2024**.

Meanwhile, the volume of private sector investment in Scotland has slowed in 2025 after building some momentum last year.

Mid-market private equity deals in Scotland fell 14% in the first half of 2025, while the number of venture capital deals recorded in Q1 declined by 6% compared to the previous quarter.

Chris Harte, chief executive of MFMac, said: “It is proving hard for Scottish businesses to shake off the effects of wider economic stagnation, which might explain why many leaders think investment capital is so scarce.

“Scotland remains one of the UK’s top destinations for foreign investment, but domestic capital investment is looking harder to come by.”

With the Scottish Parliamentary Elections due in the first half of next year, business leaders want politicians to address the long-term fundamentals required to create the conditions for growth.

These include business taxation and reliefs (37%), greater access to sector specific funding (23%), and skills and education (21%).

FCA head raises concern over investment gap

Nikhil Rathi, head of the Financial Conduct Authority has tonight warned of an “investment gap” and called for investors and lenders to “back British capability”.

He told the Corporation of the City of London’s annual City Dinner that areas such as data security and cyber protection “are cash-generating growth markets”, adding: “Don’t leave the rewards to overseas capital.”

Michael Moore, chief executive of the British Private Equity & Venture Capital Association, said: “Nikhil Rathi is right to highlight the UK’s scale-up gap and that when ‘domestic capital participation is absent, overseas investors capture the upside and capability.’

“The private capital industry welcomes the FCA’s commitment to ensuring there aren’t regulatory barriers to increasing investment in defence.

“Enabling investment into the UK’s defence and security sectors is a vital national priority and opportunity.

“Private capital can be an important partner in helping to scale those innovative firms that are rising to the challenge of meeting the demands required to strengthen our national security and boost our own domestic economic growth.”

Mr Rathi also said there was a growing need to put the financial system at the centre of Britain’s defences.

He said the UK was “not prepared, tactically or strategically” for the way modern conflict and other threats such as cyberattacks could hit companies and markets.

“With hard fiscal constraints and volatile bond markets, government cannot carry this responsibility alone,” he said. “The financial system, which determines how assets are insured, invested in and built, is as vital as any arsenal or base.”

The recent hack on Jaguar Land Rover, which wreaked havoc across the company and its supply chain, had thrown a spotlight on a “protection gap”.   JLR had not finalised a cyber-insurance deal before the attack occurred

“We are potentially massively under-insuring,” he said.