THERE have been signs for some time now that entrepreneurial activity is picking up in Scotland, but it is now looking more promising than ever. According to the Scottish Government's chief statistician, the number of businesses in Scotland has risen to a record high, with figures up by 50 per cent since records began over a decade ago. That's 121,375 more businesses now than there were in 2000.

Naturally, the news has been welcomed by government and the small business community. The Deputy First Minister John Swinney said it was hugely encouraging that there were now a record number of businesses in Scotland - creating jobs, he said, generating growth and demonstrating the overall strength of the Scottish economy. Colin Borland, of the Federation of Small Businesses, was also enthusiastic. More Scots taking the plunge and going alone will help drive the economic recovery, he said.

However, a more detailed look at the figures and the reasons for the rise in start-ups should give us pause. Mr Borland insists the rise is not just a story about the march of the one-man bands and points out there has also been an increase in the number of bigger businesses that are employing staff or trading above the VAT threshold. But by far the biggest rise was among small traders not registered for VAT and PAYE – they rose by 13.2 per cent between March 2014 and March 2015, to 191,010 businesses.

The rise in these small traders is a positive story, but it is also a reflection of more negative trends in the economy. When the rise in entrepreneurial activity was first spotted several years ago, it was largely driven by graduates who decided to go it alone in the face of a weak jobs market. Many people will also have chosen to try starting up a business because they have been laid off or forced to reduce their hours – they are showing initiative and entrepreneurialism, but they are doing it because their jobs have been cut, or cut back, in a persistently weak economy.

There are more positive factors at work in the rise too: for instance, many workers now increasingly opt for a so-called portfolio career made up of several different interests because it suits their lifestyle. The support available to start-ups in Scotland, through Business Gateway, is also reasonably good and has encouraged many entrepreneurs to take the plunge.

However, if the businesses that have got going recently are to defy the notorious failure rate of start-ups in their first few years, they must be offered more support. One-man firms may operate from an office at home, but if businesses are to grow and employ other people, they need more incentives – on business rates for example. Homeowners and tenants have benefited from a freeze in council tax yet retailers have had no such luck, and for some, business rates are the final straw. A sliding scale instead, including the first year free of rates, could help some of the bigger, VAT registered businesses to do even better.

The increase in such businesses – bigger operations that trade above the VAT threshold and employ staff – is undoubtedly an encouraging sign, and it may indicate a strengthening entrepreneurial culture in Scotland. But few of the entrepreneurs that have emerged over the last decade or so expect to employ staff other than themselves; much of the rise can also be attributed to changes in the labour market that still show no sign of abating. So many new businesses, large and small, is good news; maintaining the growth in challenging economic times will not be easy.