SCOTTISH ECONOMY FALTERING AS BUSINESSES REPORT RECORD HIGH CONCERNS OVER INFLATION AND RISING COSTS

Increasing pressure is mounting on Scottish businesses as the cost-of-doing-business crisis hits the bottom line, according to the latest findings from a leading Scottish business survey from the Scottish Chambers of Commerce (SCC).

Firms have reported record levels of concern over inflation and rising cost pressures as the economy restructures following the impact of the Covid-19 pandemic, creating complex challenges for Scottish businesses.

Adding to the pre-existing obstacles facing businesses, linked to persistent labour market shortages, international supply chain disruption, soaring energy prices and an increasing tax burden, Scotland’s economy is entering into a period of increased uncertainty.

Businesses are starting to feel the impact of reduced spending as consumers tighten their belts and disposable income drops, hitting many firms cashflow and profits, particularly in the tourism and retail sectors where recovery remains lethargic.

With inflation reaching a 30-year-high, the rapid return to economic growth seen following the removal of Covid-19 restrictions is now plateauing with firms being forced to make tough decisions around investment, recruitment, and price rises.

The situation in Ukraine is also deepening business concern with many continuing to seek advice, information and support to make decisions, adapt to rapidly changing circumstances and navigate the challenging times ahead with further international trade disruption likely.

KEY FINDINGS:

• Record Concern Over Inflation: With UK inflation reaching 5.5% earlier this year, the negative impact on businesses is becoming increasingly clear with all sectors of the economy reporting record high levels of concern. The financial and business services sector (FBS) reported a 15% increase and the tourism sector a 14% increase from Q4 2021 respectively.
• Cashflow Crunch and Profits Plummet:?Businesses continue to report significant cashflow and profit challenges, with high inflation a key driving factor. The construction, retail and tourism sectors all reported decreases in both cashflow and profits, highlighting the impact of rising cost pressures, leaving businesses at increased risk from economic shocks.??
• Growing Cost Pressures: Across all sectors, business cost pressures have increased. Raw material prices, rising energy costs, increased tax burdens and other overheads are leading pressures. Energy price rises and the ongoing global supply chain disruption are cited to be the primary contributing factors to these increases. ?
• Consumer Price Rise: In response to rising cost pressures, a record 7 in 10 firms have indicated that they intend to raise the prices that they charge for their goods and services. This is likely to deepen inflationary challenges and further increase the cost-of-living. ?
• Retail and Tourism Remain Vulnerable:?Despite the continued easing of COVID-19 restrictions over the first quarter of 2022, firms in these sectors have still reported concerning figures for both sales and investment. Retail footfall remains considerably below pre-pandemic levels due to changes in office work patterns and the removal of international travel restrictions have cooled the staycation market.?

View full report via our website: https://www.ayrshire-chamber.org/supporting-business/chamber-news