Firms remain resilient says survey
Optimism tainted by hiring and tax challenges
Neil Amner: firms still facing a number of challenges
Scottish firms remain resilient but recruitment and taxes are becoming key concerns, according to new data.
However, concerns around tax, investment and recruitment suggest that growth may remain fragile in the months ahead.
Despite these negatives, the survey, produced by the Scottish Chambers of Commerce Network in collaboration with the University of Strathclyde’s Fraser of Allander Institute, found business generally optimistic.
Neil Amner, chairman of the Chambers Economic Advisory Group, said the results “suggest that Scottish businesses are continuing to display positivity in an uncertain economic environment.”
He added: “Firms remain concerned about a range of issues, however, with over 87% of manufacturers anxious around the rising costs of raw materials and its effect on their prices.”
He noted that more than half of tourism respondents were mainly concerned about business rates, while 40% of business services cited taxation.
Mr Amner said this suggests the debate on income tax and the wider tax mix in Scotland will continue to be of interest beyond the Scottish budget’s parliamentary approval process.
Recruitment difficulties have continued to worsen for a number of sectors, particularly manufacturing, tourism and financial and business services, with the latter two sectors close to the highest levels ever measured in the survey.
“Many sectors are continuing to invest in training in an attempt to retain and upskill their existing staff, but it is clear that businesses are finding it challenging to fill vacancies,” said Mr Amner.
“This continues to emphasise the need for Government to continue investing in our talent and skills base through initiatives including Developing the Young Workforce and Foundation Apprenticeships.
“In addition the need for a practical immigration policy to arise from the Brexit negotiations, which puts business first, is made even more critical by these conditions.”
Professor Graeme Roy of the Fraser of Allander Institute said: “With heightened levels of uncertainty, it is unsurprising that investment intentions remain modest, whilst the tight labour market means that many firms continue to report difficulties in recruiting staff. Encouragingly training investment is holding up a little better.”
General / Overall
· Raw material prices a significant concern
· Inflation feeding in to price rises / cost pressures
· Expectations and overall investment slowing in some sectors, suggesting rising uncertainty.
Recruitment difficulties persist at record highs for a number of sectors, with training investment maintained at above trend levels.
- Optimism eased, however this is common in the 4th Quarter.
- Orders and sales relatively strong in comparison with Q3 2017.
- Raw materials an issue for 75% of firms, with evidence of pressure on margins with reduced profits.
Financial and Business Services
- Optimism, profits, sales and expectations all strong.
- Signs of easing investment.
- Highest level of recruitment difficulties ever recorded for this sector (47% of businesses).
- Taxation highlighted as the main concern by 41% of firms.
- Trends in new orders have eased, but remain positive.
- Firms appear to be adjusting expectations downwards, which is a slight cause for concern.
- Capital investment negative for the first time in a number of years, although investment intent high for next quarter.
- 87% of manufacturers are concerned about raw material prices, with a net % balance of 68% indicating that they will raise prices in Q1 2018.
- Strong Q4 with more positive results than much of 2017.
- Cashflow and Profit returned to positive levels for first time this year.
- Employment increase, but expectation that this is mainly seasonal.
- Caveat that retail has experienced a sustained period of change / challenging conditions for a number of years, so although Q4 may have surpassed expectations, remains to be seen if this positivity will persist in 2018.
- More negative set of results that outlined in prior Q4s, even taking into account that Q4 is generally negative for tourism.
- Significant rise in training investment, perhaps driven by recruitment difficulties.
- Business Rates the main concern for 57% of respondents.