Achi news desk-
João Sousa, at the Fraser of Allander Institute at the University of Strathclyde, said the main concern for businesses is the continued poor outlook for capital investment.
“Scotland and the UK as a whole already have lower levels of investment than other developed economies, and unlocking the factors holding investment back is key to continued economic growth,” he said.
“This interacts with the risks around political uncertainty that worry businesses, and it will be essential for political decision makers to act in a way that reduces that perceived risk in the coming months .”
Mr Sousa was speaking ahead of today’s publication of the latest Business Monitor report produced by law firm Addleshaw Goddard with the Fraser of Allander Foundation.
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The report found that the key constraints companies want ministers to tackle include labor and skills shortages and UK taxes on business.
Action in these areas will make it easier for businesses to recruit staff and fund investment in assets such as IT systems to support growth.
Businesses also believe that the next Government will need to improve the infrastructure that companies and their customers rely on.
Alan Shanks, Head of Scotland at Addleshaw Goddard, said the latest results show how important proper stewardship of the Scottish and UK economy is to the Scottish business community.
The results highlight the level of concern regarding political and economic uncertainty and the availability of staff among businesses following a period when operating conditions have been challenging.
They cover a period when companies had to deal with the consequences of the surge in inflation, which led to an increase in their costs and prompted customers to cut spending.
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Addleshaw Goddard noted: “All the survey’s regular measures of activity – sales, new business, turnover employment, capital investment and exports – were in negative territory for the first time since the end of 2022.”
Although official figures show that the rate of inflation has fallen significantly in recent months, the survey found that cost pressures have intensified for companies in Scotland.
Around 83% of respondents had seen costs increase in the most recent period, compared to 78% in the previous quarter.
Staff costs represented the biggest challenge, with 76% of businesses reporting an increase in wage bills.
It appears that conditions have become bad enough to prompt companies to cut jobs. More companies reported a decrease in the level of employment than reported an increase. A net balance of companies indicated an increase in employment levels for most of 2023.
However, companies may believe that trading conditions are about to improve.
Addleshaw Goddard said companies were increasingly optimistic about the expected volume of domestic business over the next six months, new business activity, turnover and employment. However, many are prepared for a drop in exports.
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Mr Sousa of Fraser of Allander concluded: “This quarter’s results were a bit of a mixed bag, with businesses noting that economic activity had fallen but expecting it to pick up again in the coming months. This is good news for the coming quarters, and in line with our expectations of moderate growth for 2024 overall.”
The annual rate of Consumer Price Inflation fell to 3.2% in March from 3.4% in February said the Office for National Statistics yesterday.
The rate was the lowest recorded since 2021. Inflation reached a 40-year high of 11.1% in October 2022.
The rate remains higher than the 2% rate targeted by the Bank of England. However, the drop has fueled hopes that the bank will begin to reverse the series of interest rate hikes it imposed to tackle rising inflation.
The bank raised its base rate 14 times, from 0.1% in December 2021, to 5.25% in August. It has held the rate ever since.
Addleshaw Goddard said the business monitor survey sampled nearly 400 companies in February from across the Scottish economy.
