AI is making Scottish firms faster – but not necessarily richer
Artificial intelligence (AI) is helping Scottish mid-market businesses deliver faster, but those gains are not necessarily strengthening profitability.
FRP Advisory commissioned Censuswide to survey 250 senior leaders and board members at UK companies with 50 to 500 employees this summer, finding that while the technology is raising the standard of service customers expect, this is putting more pressure on businesses to ensure those efficiencies are also improving margins and cash flow.
Consequently, 60% of Scottish respondents face increased pressure to deliver more for the same price – and the same proportion reported increased expectations of round-the-clock, or near-instant, responses.
More than half (53%) of those surveyed stated that AI efficiencies have primarily shown up in faster customer delivery, while 47% reported improved margins. But 53% also said efficiencies had been offset by rising costs elsewhere.
Callum Carmichael, partner in FRP’s restructuring advisory team, said: “If customers quickly come to expect faster responses and more output for the same price, businesses can find themselves investing simply to stand still.
“This risks creating a dangerous cycle, where each improvement raises the standard customers expect, prompting further investment, while added costs and complexity absorb the benefits before they reach margins and cash flow.”
This pressure is also being felt in conversations with lenders. In a separate survey of 251 UK lenders and investors, 43% of Scottish respondents said they were not confident borrowers fully capture the cost of AI adoption in their business plans.
Almost two thirds (64%) identified cyber security as an AI-related cost borrowers may underestimate, while 57% pointed to data infrastructure. Where readiness is weak or anticipated benefits are poorly delivered, 43% said it could affect pricing or margins on lending. The same proportion said it could reduce confidence in financial forecasts.
Carmichael added: “Lenders will want evidence that reported margin gains are sustainable, rather than a short-term benefit that could be absorbed by further investment or customer pressure.
“Where anticipated efficiencies underpin forecasts, businesses need to demonstrate the full costs, when returns should materialise and how much of the value will ultimately reach cash flow.
“They must also be prepared to explain what happens if costs rise or benefits take longer than expected,” he added. “Businesses that can provide that evidence, alongside a credible plan for responding to underperformance, will be best placed to maintain lender confidence.”
