The latest Scottish Chambers of Commerce (SCC) Quarterly Economic Indicator survey (QEI) for Q2 of 2019 shows that businesses continue to face difficulties due to the prolonged uncertainty around the UK’s position in relation to Brexit.
Other factors such as the costs of doing business in Scotland and a slowdown in the global economy have also contributed to a lack of investment decisions and slower growth. Firms in Scotland remain extra cautious about investment which is bedding in risk that the Scottish economy will suffer in the medium and long term.
The QEI also revealed that most sectors in Scotland are reporting rising cost pressures – from raw material prices and other overheads – related to Brexit preparations.
64% of manufacturing firms and 52% of construction firms reported “rising raw material prices as their top cost pressure”.
Whilst overall business confidence made a slight recovery from three months ago when the UK faced a cliff-edge Brexit, it is generally lower than the same period last year. The underlying trends of the survey hint that the economy is running low on fuel and is in need of an injection of confidence.
Manufacturing continues to be the sector most heavily affected by the ongoing uncertainty. Stockpiling in Q1 has resulted in capacity utilisation being at its lowest level in ten years, according to the survey.
Businesses continue to report consistent challenges in recruiting. Over 80% of tourism firms are attempting to recruit staff, with nearly 70% of these firms facing difficulties in doing so. More than half of manufacturing companies surveyed face challenges acquiring the skilled workforce that they need to operate.
The survey revealed that pay increases are on the rise across the board. Indeed, the indicator found every sector on balance increased wages over the quarter apart from retail, showing that firms are having to pay more to retain their workforce as the supply of skilled labour eases.
The Scottish Chamber Network wants to see increased public and private investment into the learning and training processes needed to ensure that Scotland’s workforce is appropriately skilled at all stages of their careers. This includes ensuring they are equipped to fully harness the increasing requirements of technological advancement.
With Brexit causing ongoing uncertainty for firms across Scotland and the rest of the UK, we would urge any future UK government to be quick out of the blocks to work with the business community in tackling some of the most challenging problems holding back investment, growth and productivity in our economy.
*The QEI surveys firms from five key sectors in the Scottish economy: Construction, Manufacturing, Financial & Business Services, Retail and Tourism.
*This survey was conducted between March and June of 2019. 350 firms responded to the Q2 2019 edition of the indicator.
