SCC: Increasing concerns for Scottish businesses

The Scottish Chambers of Commerce (SCC) have highlighted a number of key concerns which are facing Scottish businesses, including price rises, labour costs, inflation and a decline in consumer confidence.

As a result of these hardships, cashflow and profits are falling, investment decisions have paused, and firms are raising prices and struggling to recruit and retain staff, the SCC have said.

The SCC’s report said that 82% of all firms indicated that they intend to raise their prices over the next quarter, a record high for the survey. The retail and tourism sectors had the highest proportion of firms indicating a future price rise at 77% and 76% respectively.

The report said that labour has now overtaken energy as the top cost pressure for businesses, with concern over the former halving since the last quarter as a result of the Government’s energy bill relief scheme. Over seven in ten firms (72%) said that labour costs were now the biggest cost pressure for businesses. Concern remains over the cost of fuel and raw materials, both cited by six in ten firms.

Concern for inflation has fallen for a second successive quarter, but is still cited by 8 in 10 businesses and thus remains the biggest worry for firms. The next highest concern is interest rates, at 50%.

All firms have reported a fall in confidence in comparison to the previous quarter, and a much sharper decline compared to the previous year. Every sector reported a fall in confidence with retail and tourism the biggest victims.

Stephen Leckie, president of the Scottish Chambers of Commerce said: “The end of 2022 turned out to be a bleak period for Scottish businesses. All sectors are coming under immense strain because of upfront costs which are hitting cashflow and profits. Additional cost pressures are adding to this burden, particularly with rising staff costs, which is leading the majority of businesses to raise prices.

“There can be little doubt that recessionary effects are dragging the Scottish economy away from recovery and growth. The survey results paint a particularly worrying picture for the retail and tourism sectors with contractions in future sales and investment intentions.

“As relief packages come to an end, businesses are extremely concerned particularly on energy prices which continue to be volatile. Any sudden removal of this support could severely impact business survivability.

“We call on the UK and Scottish Government to urgently support SMEs (small and medium-sized enterprises) by providing relief packages and a clear economic plan.”