finance

SCC survey shows shoots of recovery, but warns challenges still lie ahead



For the first time in over a year, businesses in Scotland can see the first shoots of recovery as Covid-19 restrictions begin to lift, according to the Scottish Chambers of Commerce (SCC).

Its latest Quarterly Economic Indicator (QEI) – Scotland’s longest-running economic survey of its kind, operating since 1990 – indicates more positive growth across all sectors surveyed, although caution is still the watchword for many businesses.

A total of 330 firms responded to the second quarter survey, with all sectors reporting substantial rises in confidence and domestic sales, owing to the easing of general and domestic travel lockdown restrictions.

Most results are positive for the first time in over a year, albeit from historically low bases.

All sectors also have projected positive expectations for the third quarter, likely boosted by the expected further easing of lockdown restrictions.

While firms are optimistic about sales revenue, they are more cautious around investment and staff levels with most firms envisaging no change to these in the second quarter.

However, Covid-19 disruption and Brexit fallout has resulted in trading difficulties for businesses in services, manufacturing and retail as evidenced by falls in export sales and orders across these sectors.

All sectors have also recorded increases in concern over inflation, which the SCC stated may escalate as more consumers spend savings accumulated over the last 16 months and create uncertainty for business in terms of their costs and prices.

Most sectors saw a slight increase in employment, apart from retail, which saw no change over the quarter.

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Most firms, across all sectors, expect little change in the third quarter, which could result in sluggish jobs growth, with further challenges expected as the furlough scheme is withdrawn.

Tim Allan, president of the SCC, said: “It’s clear that concerns remain around the ongoing impact of Covid-19, as businesses grapple with huge uncertainties over what the economy will look like post-pandemic.

“Towns and city centres face new challenges as more people work from home and more flexibly, impacting on footfall and changes to consumer behaviour, while the needs of employers and employees alike need to be finely balanced as we shape the recovery of our city centres which will impact on a wide range of sectors and supply chains.

“Equally, sectors such as tourism and international travel, which continue to operate with severe restrictions, are having to adjust to increased domestic demand, a simultaneous fall in international travel and a tightening supply of skilled labour.

He added: “As we approach the end of restrictions, businesses are increasingly turning their attention towards how to achieve long term growth and renew Scotland’s economy.

“The priority must be given to continuing the provision of targeted financial support where it is needed most and looking ahead, so both governments must create the right environment for businesses to get back on their feet, create jobs and trade successfully again.”

Commenting on the results, Fraser of Allander Institute director Mairi Spowage pointed out that in April the Scottish economy grew by 2%, taking it past the previous post-pandemic peak in October – although this is till 3.7% below the pre-pandemic peak.

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“Despite the optimism in the economy, there are risks to recovery which could provide headwinds to growth; the dislocation in global trade was significant due to the pandemic.

“However, we also know that the end of the EU transition period has caused significant issues for manufacturers and others trying to rebuild these supply chains since the start of this year.

“Recent announcements of the delay to the restrictions roadmap will lead to calls from some sectors that there should much more extensive business support to get them through to a position where they can properly operate,” noted Spowage.

“As well-meaning as initiatives like a new Council for Economic Transformation may be, practical policy measures to help these businesses survive through the winter are likely to be needed.”

The SCC is Scotland’s largest business network, with more than 12,000 business members, across a network of 30 regional Chambers of Commerce, providing business support, business intelligence and business connections.

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