Growing anxiety among Scottish firms over economy

Scottish companies are becoming increasingly anxious about their prospects in the face of complex economic challenges, a report has found.

A Scottish Chambers of Commerce survey found record levels of concern over inflation and rising costs.

It said firms already faced obstacles in a period of increased uncertainty.

They included persistent labour market shortages, international supply chain disruption and soaring energy prices.

SCC's latest quarterly report found there was also concern about an increasing tax burden, with the recent rise in National Insurance and the prospect of impending devolved taxes such as the Workplace Parking Levy and Transient Visitor Levy.

The survey indicated that many firms, particularly in retail and tourism, had seen their cashflow and profits hit as consumers tightened their belts and disposable income dropped.

In response to rising cost pressures, seven in 10 firms indicated that they intended to raise the prices of their goods over the next few months.

The situation in Ukraine was also deepening business concern.

However, the survey found that firms working in construction, financial and business services and manufacturing remained optimistic about their expectations for the second quarter of this year.

Expectations were more volatile in retail and tourism. While firms in these sectors expected sales and staff levels to increase in the second quarter, they indicated they would be pulling back on investment.

SCC president Stephen Leckie said Scotland was approaching a critical point in its economic recovery, with growth levelling off.

He said: "Firms are becoming increasingly anxious about rising inflation, energy prices and cost pressures. For too many businesses, the focus is still simply on survival.

"Businesses who have weathered the pandemic over the past two years are now seeing problems pile up, one on top of another, as they struggle with longstanding challenges linked to recruitment, planning and managing change.

"They are now being hammered by surging energy prices, inflation and falling consumer spending."

He added that the Scottish and UK governments needed to "urgently rethink the impact of new and increased taxes on business if the economy is to be given the headroom it needs to survive this crisis and grow".

The Scottish government said it was doing all it could to ensure people, communities and businesses were given as much support as possible to deal with the rising cost of living.

But it said many of the powers required to tackle the issues, such as energy markets, were reserved to Westminster.

A spokesman added: "The extensive measures we have taken come despite the UK government's announcement of funding to mitigate the cost of living crisis reducing the resources the Scottish government is expected to have available."

A HM Treasury spokeswoman said: "We have backed businesses throughout the pandemic with an unprecedented package of support including VAT cuts, government backed loans, and the furlough scheme, worth around £400bn, and we will continue to stand firmly behind them in the months ahead.

"We are also investing in skills, innovation and infrastructure to boost growth for the long term."