Profit and turnover down at top 100
Concerns over labour and prices as income slips
Worries over restrictions on immigrant labour and rising prices resulting from the lower value of sterling are continuing to weigh on company prospects, according to a new report.
It reveals that Scotland’s top private firms saw turnover, profits and payrolls fall last year amid a climate of growing political and economic uncertainty.
Grant Thornton’s annual Scotland Ltd report showed the biggest 100 firms suffered a slip in combined revenue to £20.8 billion in 2016, a fall of £1.7bn on 2015, while the number of employees fell from 116,284 to 110,632.
The list was based on a hybrid measure of data, which includes turnover and profits.
It showed food and drink once again dominating the list, with 24 against 21 in 2015.
The biggest and third biggest came from this sector – Glenfiddich distiller William Grant and Sons, and Edrington, maker of the Famous Grouse.
Even so, the combined turnover among food & drink firms was down from £4.1bn in 2015 to £3.7bn.
In its overview of the top 100 the report states: “Combined turnover remains impressively high at £20.8 billion, but is around £1.7 billion lower than our 2015 report.
“Scotland’s Food & Drink sector has been held up as an example of how an industry based on a wide mix of businesses and specialisms can work together and achieve record breaking growth.
“However, global economic and political uncertainty has taken its toll on even the most successful of industry groups.”
Housebuilder Cala Group saw the largest percentage rise in turnover, while energy companies have shown remarkable resilience to the pressures caused by the fall in the oil price with two more firms in the list than in 2015.
Glasgow, with 25, has the most companies in the list, followed by Edinburgh (15) and Aberdeen (9).
James Chadwick, head of food and drink at Grant Thornton in Scotland, said: “The Food & Drink sector in Scotland remains on course to exceed its £16.5bn valuation target by the end of 2017.
“The industry deserves the credit it is receiving worldwide. Hard work and serious collaboration has resulted in a complete turnaround in perceptions and revenues.
“However, there is no doubt that Brexit and other political uncertainties will have an impact. To an extent, we’re holding our breath, waiting to see what might happen to exports and trading conditions.
“But, the hard work has already been done and the industry is in a strong, healthy position, ready to take on the challenges that lie ahead.”
David Thomson, chief executive of the Scottish Food and Drink Federation, added: “Scotland’s food and drink industry remains strong and vibrant – as this report demonstrates.
“With 24 out of the top 100 businesses working in the food and drink sector, our companies are of critical importance to Scotland’s economic future.
“There are significant challenges on the horizon. It is essential that the food and drink sector is given assurance as we begin to negotiate our exit from the European Union.
“With currency fluctuation, import prices have risen, and the price of food is likely to go up early in 2017.
“Food and Drink companies rely on EU workers, valued employees who bring important skills and expertise.
“Their future – and Britain’s future immigration policy – must be clarified as soon as possible. Holyrood and Westminster should ensure that they prioritise such a critical industry in EU negotiations where there is a minefield of complex legislation.
The Scotland Ltd data raises some cautious optimism for the energy sector. Despite the problems besetting the North Sea oil industry, nine companies have made this year’s top 100 – against seven in 2015. Turnover is also up from £1.2bn to £1.4bn.
Ian Knott, advisory director for Grant Thornton in Aberdeen, said: “Despite the many issues facing the industry and the region right now, there are reasons to be optimistic.
“The industry has been here before and pulled through, reflecting the resilience of a sector that is built on innovation and overcoming significant challenges.”
Twenty property and construction companies make the list, against 17 in 2015 with 14,571 direct employees – almost 2,000 more than the previous year.
Balmoral Group Holdings, CCG (Holdings) and Advance Construction Group are the top 100’s ‘biggest movers’ in the sector, witnessing rapid revenue growth.
Despite the promising signs, the next year brings new risks. Many of the major projects helping to reinvigorate the sector depend on European funding and EU workers.
Lorraine Macphail, head of property and construction in Scotland, at Grant Thornton, said: “Thousands of jobs were lost and many projects mothballed, but we’re now finally starting to see the shoots of sustained recovery.
“Sadly, the fresh risk of withdrawal from the single market means many of the challenges of 2009 could return.”
> More than half of small and medium-sized firms say they will increase their prices this year due to the weak pound, a survey by the British Chambers of Commerce has found.
A similar proportion said currency was having a negative impact on their profitability.
The BCC said rising import costs were “squeezing” SMEs’ margins.