Bussiness
Scottish businesses call out for economic growth and political stability
A survey of around 400 firms from across the economy has revealed that ‘delivering long-term economic growth’ is their top priority, selected by 72%, followed by ‘tackling labour and skills shortages’ (45%), ‘reducing UK business taxes’ (43%), and ‘investing more on infrastructure’ (39%).
This is according to the latest Addleshaw Goddard Scottish Business Monitor, produced in partnership with the University of Strathclyde’s Fraser of Allander Institute.
The first quarter report also showed that all of the survey’s regular activity measures – sales, new business, turnover, employment, capital investment and exports – were in negative territory for the first time since the end of 2022.
Cost pressures continue to bite, despite falling inflation, with 83% of firms in Scotland seeing their costs increase over the last quarter, compared to 78% last quarter.
In every category, the proportion of businesses reporting that costs were higher has increased compared to last quarter. The increase in the cost of employing people were the most commonly cited, with 77% reporting that total employee costs were higher and 76% reporting that wage costs were higher.
The vast majority of businesses expect economic uncertainty, staff availability and political uncertainty to be important or very important over the next three months – up considerably compared to last quarter.
However, firms are increasingly positive as they look ahead, with the expected volume of business over the next six months remaining positive, along with positive expectations of new business activity, turnover and employment.
The net balance of firms reporting an increase in volume of sales fell to -7.1 percentage points, meaning that more firms have seen a decline in activity than have seen a rise. The measure of new business also deteriorated significantly, with a net balance of -13.5 percentage points, compared to -9.6 last quarter.
The net balance of firms reporting an increase level of employment fell into negative territory, after being in positive territory for most of 2023.
Meanwhile, levels of new capital investment and export activity measures remain negative, although capital investment is not as negative as in late 2023.
A further 85% of firms reported that they expected total business costs to be higher in the next six months – up from 67% in last quarter.
João Sousa, deputy director of the Fraser of Allander Institute, said: “This quarter’s results were a bit of a mixed bag, with businesses noting that economic activity had fallen, but expecting it to pick back up in the coming months.
“The main cause for concern, however, is the continued poor outlook for capital investment.
“Scotland and the UK as a whole already have lower levels of investment than other advanced economies, and unlocking the factors holding back investment is key to sustained economic growth.
“This interacts with the risks around political uncertainty that worry businesses, and it will be crucial for political decision-makers to act in a way that reduces that perceived risk in the months ahead.”
Alan Shanks, head of Scotland at Addleshaw Goddard in Scotland, said: “Among some rather sombre figures, what is clear is that Scottish businesses remain resilient and optimistic, and are doing their utmost to drive the economic recovery that we hope so see over the course of 2024.
“However, these latest results show just how important proper stewardship of the Scottish and UK economy is to the Scottish business community. “
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