The results of Scottish Chambers of Commerce’s Quarterly Economic Indicator were released in February and they told of mixed fortunes for Scottish businesses, who are managing to perform well in spite of difficult trading conditions.
They also suggest that there is more governments can do to support businesses and increase their trading confidence moving forward, particularly towards a critical period for the economy as the effects of Brexit become clearer.
Scottish businesses have demonstrated their robustness and resilience by maintaining strong sales figures, although this is being offset by costs that they wouldn’t typically be incurring due to political uncertainty. Extra outlays in preparing for various possible Brexit scenarios have taken up valuable resources and time for businesses that would otherwise be focusing on growth. The effect of having to implement these contingency measures, alongside stalling investment, is reflected in falling levels of business confidence across the majority of sectors with many businesses appearing to be in a holding pattern.
Confidence in the manufacturing sector is at its lowest level since 2012 as it saw a generally negative set of results, with an expected fall in orders from Scotland, the rest of the UK as well as from abroad. The festive session that did not prove to be as lucrative as hoped for Scottish retailers, resulted in dipping confidence and rising cost pressures.
Cost pressures remain a key concern for firms, with raw material prices cited consistently as a leading cost pressure for Construction, Manufacturing, Retail & Wholesale and Tourism. Recruitment difficulties also remain a persistent challenge, an issue that is particularly affecting manufacturing and tourism. An ability to access the skills that they require in a post Brexit UK is a priority for businesses across all sectors. Any future immigration system must be one that meets the needs of Scottish and UK businesses. As the proposed system stands, it will be difficult for most Scottish firms to access any non-UK talent or labour. That could have a drastic effect on Scotland’s economy due to demographics and prove a very real challenge in the face of an ageing Scottish population.
Overall, the survey highlights the extent to which business uncertainty in the Scottish economy has been affected by Brexit. It is important to note that there are global economic and societal trends at play too, particularly when it comes to manufacturing and retail respectively. Over the course of the coming weeks and months, it is critical that political decision-makers take into consideration measures to alleviate cost pressures upon businesses and take action to clear a path for firms to focus on growth and sustainability.
*The Quarterly Economic Indicator is owned and produced by the Scottish Chambers of Commerce Network, in collaboration with the Fraser of Allander Institute of the University of Strathclyde.
This survey was conducted between October and December of 2018. 385 firms responded to the Q4 2018 edition of the Indicator.