The Scottish Chambers of Commerce (SCC) partners with the internationally recognised economic research unit, the Fraser of Allander Institute, to produce a Quarterly Economic Indicator (QEI) periodically.
This QEI survey is the longest running data series of its kind, which in turns provides a regular and respected insight into the fortunes of key Scottish sectors.
With a focus on key industrial areas including manufacturing, construction, finance, business services, tourism and retail, it measures several economic indicators including business optimism, investment and performance to provide a comprehensive understanding of the Scottish business landscape.
A highly respected and influential publication, the QEI is consistently reported across the national media and commented on by senior Scottish business leaders. It plays an essential role in setting the business agenda and informing the most senior levels of government and policy making of the needs of local chambers and their members.
The SCC’s most recent QEI for the second quarter of 2021, published on Tuesday 6th July, revealed that for the first time in over a year, businesses in Scotland are now seeing the first shoots of recovery as COVID-19 restrictions begin to lift.
Whilst the findings indicate more positive growth across all sectors surveyed, this growth is from a historically low base and caution remains the watchword for many businesses.
Analysis of the QEI clearly showed that the pent-up demand in the marketplace has been unleased with all sectors reporting substantial rises in confidence and domestic sales, owing to the easing of general and domestic travel lockdown restrictions.
This increased demand drove the most positive set of results from businesses since the beginning of the COVID-19 pandemic providing a positive direction for businesses as restrictions ease further.
Despite this increased positivity and optimism amongst Scotland’s business community there is still a degree of caution looking ahead.
All sectors that took part in the survey projected positive expectations for Q3, on balance, likely boosted by the expected further easing of lockdown restrictions. However, while firms are optimistic about sales revenue, they are more cautious around investment and staff levels with most firms envisaging no change to these in Q2.
International trade has also faltered in the past quarter with continuing Covid-19 disruption and Brexit fallout affecting the market, resulting in trading difficulties for businesses in services, manufacturing and retail as evidenced by falls in export sales and orders across these sectors.
Looking at the bigger economic picture there are also growing concerns over a rapid rise in inflation, which has reached 2.1%, breaking the Bank of England’s 2% target for the first time in over two years. This was reflected in the QEI with all sectors recording increases in concerns over inflation, which may escalate further as more consumers spend savings accumulated over the last 17 months and create more uncertainty for business in terms of their costs and prices.
This has also been compounded by a flat labour market, with only a slight increase in employment across all sectors, apart from retail, which saw no change over the quarter. Most firms also reported that they expect little change in Q3 which could result in continued sluggish jobs growth, with further challenges expected as the furlough scheme is withdrawn.
Commenting on the findings of the 2021 QEI, Tim Allan, President of the Scottish Chambers of Commerce said: “The success of the vaccine rollout has enabled the easing of restrictions and the gradual reopening of the economy, unleashing pent-up demand in the economy. This has allowed some sectors to rebound more quickly than others, however, the route to economic recovery will be a marathon, not a sprint.
“It’s clear that concerns remain around the ongoing impact of Covid-19 as businesses grapple with huge uncertainties over what the economy will look like post-pandemic. Towns and city centres face new challenges as more people work from home and more flexibly, impacting on footfall and changes to consumer behaviour. The needs of employers and employees alike need to be finely balanced as we shape the recovery of our city centres which will impact on a wide range of sectors and supply chains.
“Equally, sectors such as tourism and international travel, which continue to operate with severe restrictions, are having to adjust to increased domestic demand, a simultaneous fall in international travel and a tightening supply of skilled labour. The sector needs continued financial support and greater clarity on when confusing and burdensome travel regulations will end, allowing greater numbers of international visitors to return.
“As we approach the end of restrictions businesses are increasingly turning their attention towards how to achieve long term growth and renew Scotland’s economy. We have recorded the first shoots of growth returning to our economy, and it is essential now that both the Scottish and UK Government’s do all that they can to stimulate demand and boost confidence in the coming months. Priority must be given to continuing the provision of targeted financial support where it is needed most and looking ahead, both Governments must create the right environment for businesses to get back on their feet, create jobs and trade successfully again.”
Commenting on the results, Mairi Spowage, Director at the University of Strathclyde’s Fraser of Allander Institute, said: “In April, we saw growth in the Scottish economy of 2.0%. This takes us above the previous post-pandemic peak in October. However, the economy still remains 3.7% below the pre-pandemic peak.
“Despite the optimism in the economy, there are risks to recovery which could provide headwinds to growth. The dislocation in global trade was significant due to the pandemic. However, we also know that the end of the EU Transition Period has caused significant issues for manufacturers and others trying to rebuild these supply chains since the start of this year. This chimes with today’s survey results, which show significant negative impacts on exports.
“Recent announcements of the delay to the restrictions roadmap will lead to calls from some sectors that there should much more extensive business support to get them through to a position where they can properly operate. As well-meaning as initiatives like a new Council for Economic Transformation may be, practical policy measures to help these businesses survive through the winter are likely to be needed.”
The full QEI results for Q2 of 2021 can be found on the Scottish Chambers of Commerce website at:
www.scottishchambers.org.uk/wp-content/uploads/2021/07/SCC-QUARTERLY-ECONOMIC-INDICATOR-Q2-2021-Report.pdf
Over the next quarter the SSC Network will be coming together to look at a redesign of the QEI with a view to providing greater regional and sectoral insights to support Scotland’s business community and use the information provided to better inform key policy and decision makers on the needs of Scotland’s businesses.
To become involved in supporting this redesign, please contact the Scottish Chambers of Commerce Policy and Communications team by emailing Colin Campbell or John Erskine.
