SME Business Report 2026

Edinburgh’s small and medium-sized enterprises (SMEs) are the least confident of Scotland’s major cities as business viability concerns remain high nationwide, according to new research from Aberdein Considine LLP.

Capturing the views of Scottish SMEs in the run-up to the Holyrood election in May, research carried out in January by Censuswide on behalf of the legal firm - as a follow-up to its 2025 SME Business Outlook survey - shows that concerns about business survival have continued into 2026, with 81% of SMEs across Scotland saying their viability is at risk, only a slight increase on the 80% recorded last year.

Among Scotland’s key population centres, 84% of SME owners in Edinburgh and the Lothians reported concerns about their survival over the year ahead, compared with 82% in Aberdeen and the North-east and 75% in Greater Glasgow and Clyde.

In addition to concerns about viability, the proportion of Scottish SMEs feeling optimistic about their own sector in the year ahead has fallen sharply, dropping from 83% last year to 50% in 2026.

Despite this decline in overall optimism, the 2026 survey points to a more favourable view of the Scottish Government than previously, with four in five SMEs saying the impact of the 2026 Scottish Budget – which was announced in January – will be positive for their business. This marks a notable shift from 2025, when more than a third of businesses (37%) identified Scottish Government policy changes as their biggest barrier to growth.

While the majority of Scottish SMEs agreed that the Scottish and UK Governments prioritised their needs, at 66% and 65% respectively, this was not the sentiment expressed across the board, with one respondent from the retail sector claiming bureaucracy stands in the way of success, saying: “It's soul-destroying watching lifelong passion bleed out from red tape.”

Respondents pointed to several obstacles to business confidence, with more than a third (35%) citing supply chain disruptions as their biggest financial challenge in the next 12 months (up from 23% the previous year). Staff recruitment and retention costs were also noted as a significant cost pressure, with 33% identifying them as a major fiscal challenge, up from 19% in 2025.

The 2026 research also found that rising operating costs were chief among the barriers to business growth over the next 12 months, with more than one-fifth (22%) of respondents citing operational costs as their primary constraint. This is followed by concerns around skills gaps and workforce challenges and competitive pressure from other businesses, both at 17%.

When asked what the Scottish Government could do to improve conditions for SMEs, a third of respondents called for action to stimulate inward investment, followed by improving the availability of grant funding (31%), loosening restrictive regulations (19%) and cutting taxes or providing tax reliefs (17%).

However, 89% of respondents said the recently announced three-year 15% Retail, Hospitality and Leisure (RHL) rates relief, for retail businesses with a rateable value of up to £100,000, would have a positive effect for their business.

Ritchie Whyte, Partner and Head of the Corporate and Business Advisory team at Aberdein Considine, said: “If we had to describe the current status of Scotland’s small and medium-sized enterprise (SME) community in just three words, it would be ‘embattled yet resilient’. Aberdein Considine’s 2026 SME Business Outlook survey, which builds on our research from last year, provides a snapshot of business owners’ perspectives on the market, with only a couple of months to go until the Scottish election.

"Our 2026 survey has recorded a persistent level of concern over viability since mid-2025, with a startling four in five Scottish SMEs saying their business remains at risk coupled with a large drop in SME optimism across the country, which suggests that many SMEs still feel exposed to stubborn cost pressures and uncertainty. The regional findings of this year’s survey also paint an interesting picture: the Scottish capital emerges as the least confident among Scotland’s major cities for SME viability.”

In stark contrast to findings from 2025, the updated SME Business Outlook reveals that the number of SMEs which plan to invest in ESG initiatives and sustainability has fallen, down from 52% last year to 36% in 2026, signalling a change in priorities as businesses are further squeezed by cost pressures.

This trend is reflected in SMEs’ priorities around workforce growth, as the proportion of respondents identifying expanding their workforce as a key goal for the year ahead has fallen, from 39% in 2025 to 29% in 2026. However, expansion is not totally removed from the minds of business owners, as around abthird (31%) plan to prioritise investing in growth areas, bolstering skills development for existing staff members and adopting new technologies.

Ritchie added: “Changes in SME investment priorities between last year and today signal a shift in focus as businesses navigate rising costs and economic pressures. While fewer SMEs are prioritising investing in ESG initiatives or workforce expansion compared with 2025, it’s encouraging to see that many are still focused on strategic growth, including developing skills and investing in areas that strengthen their core operations.

“The SMEs responding to our survey have outlined what they need from the government to ease concerns, and ultimately allow them to succeed and grow, which include creating clearer routes to investment and funding and loosening what can often be a restrictive regulatory landscape in many sectors. With only a short time until the election in May, the time to ensure their needs are addressed is now.”

Read the full SME Business Outlook Report for 2026.