Recent Government figures have shown that Scotland’s spending outpaced revenue by £26.2 billion for 2024-2025.
This marks a £5.1 billion increase from the previous year and the deficit now represents minus 11.6% of the country’s GDP.
As a business owner, you might be looking at those figures with a mix of fear and envy.
Would that all businesses could spend so freely and still claim financial sustainability.
However, there is also the question of how this deficit will be addressed and whether your business will be the one footing the bill.
Why is the Scottish deficit growing?
The main cause of the growing deficit is a notably high amount of public spending compared to the rest of the UK.
The Scottish Government are spending £2,669 more per person than the UK average.
While this does suggest that Scottish schools, hospitals and other vital services will be benefiting from increased funding, having such a high deficit is not sustainable.
These financial issues are not limited to Scotland as the whole of the UK is currently struggling to balance the books.
What could the deficit mean for businesses?
The large deficit is a double-edged sword for Scottish businesses.
If the Scottish people feel the benefit of the increased spending, then it is possible that they may have enhanced spending power.
Unfortunately, an increasing deficit can not be kept going indefinitely and the economic void will need filling eventually.
It is possible that increased taxes or other measures, like the recent hike in employer National Insurance Contributions, could see businesses shouldering more of the fiscal responsibility.
The alternative would be to increase taxes for workers and homeowners, which would in turn impact businesses as that enhanced spending power dwindles.
The current state of the UK economy is troubling and Scotland seems to be at risk of struggling even more.
At times like this, businesses need to do all that they can to prepare for any economic downturns that could disrupt cash flow.
We would strongly advise any businesses that have not been audited recently to get an audit so that they can identify risk areas and address them early.
Gaining a better understanding of your financial position is vital if you want to stay adaptable in the event that economic factors improve or deteriorate.
We are on hand to provide thorough audits with the community-driven care and attention that our clients have come to expect from us.
