Scottish Chambers of Commerce is always one step ahead when it comes to taking the pulse of the Scottish economy. That is because our newly rebranded Quarterly Economic Indicator is not only the longest running business survey of its kind in Scotland and covers the widest range of industry sectors, it is also now the biggest economic survey in Scotland, measuring both the performance and outlook of over 640 businesses across the length and breadth of Scotland.
As official data was being published by the Scottish Government showing that Scotland enjoyed steady growth at the end of 2014, our Quarterly Economic Indicator was telling us about the economic conditions for Scottish businesses right here, right now in 2015.
Our first economic indicator covering 2015 depicts an economy that has returned to pre-recession levels and is now on a path of slower growth. However, it is not enough to get back to where we were – that wasn’t good enough then and it isn’t good enough now. Scotland needs to up our game and our targets. Other economies have moved on and we need to catch up and overtake them.
The indicator shows that growth levels across most sectors have slowed considerably compared with the final quarter of last year, but most indicators still remain above pre-recession levels and long term averages, and some point towards an improved performance from Scotland’s businesses going forward.
Sales revenue and profits declined noticeably in the Construction and Tourism sectors and, although revenues grew for Financial & Business Services, Manufacturing and Retail & Wholesale firms, all increased at slower rates than in the previous quarter. Employment growth was also weaker than at the end of 2014 across all sectors.
It is encouraging however that spending on investment increased in every sector. Alongside improved productivity, Scotland can only fuel long term economic growth through increasing capital and labour inputs. If we want to encourage businesses to continue to invest, and to stimulate much needed consumer demand, interest rates must not be raised above current levels, at least for the remainder of this year.
When business is successful, Scotland is successful; and this can only be achieved through breaking down the barriers that limit the success of our businesses. We need governments in Edinburgh and London that will not only listen to the concerns and needs of business, but that follow through on pre-election commitments.
Whatever the outcome of the General Election, the priorities of Scottish businesses are clear: we need action to open up international opportunities, to ensure a more appropriate skills mix, to deliver more effective connectivity and to reduce the tax burden on businesses. Scotland’s private sector is growing but we need to get the business environment right to secure its long term success.
Achieving this will mean close co-ordination between the activities of the UK Government and of the Scottish Government – a need complicated by the fact there will be elections to both of these Parliaments in May 2015 and May 2016 respectively. However putting aside political uncertainty, it is clear that if Scotland’s economic landscape is to be shaped to ensure the best possible fertile ground for business success, action will be needed from both of our Parliaments.
This will require a careful balancing act, as not only are the powers to assist businesses divided between our two Parliaments in London and Edinburgh but there is also an ongoing transfer of some of these powers from Westminster to Holyrood as a result of the Scotland Act 2012 and the recommendations of the post-referendum Smith Commission. Nevertheless, rapid progress is required if the offering to business is to be improved in key areas such as skills and education, internationalisation and connectivity.
Our research is telling us that the outlook for economic growth in Scotland is bright but we cannot take anything for granted and we should not be satisfied with going back to the way things were before the recession. That was far from a healthy economy back then, particularly for Scotland’s private sector, with annual economic growth between 2001 and 2007 averaging little more than 1.5%. We need far greater ambition for Scotland than this and Scotland’s businesses are willing and able to deliver.
The challenge now is to unlock the potential in our businesses, to enable them to become more innovative and more productive and to shape our economy to be more balanced and more outward looking – to be the best and to compete with the best in a global environment. To achieve this we need a solid bedrock of support from our Governments. That will be the real challenge in the post-election environment and it is one that our politicians must deliver on.
