Investment falls across sectors
Holyrood urged to ‘play a part’ in easing Brexit worries
Neil Amner: ‘policy in key areas must provide certainty’
Scottish Government ministers have been urged to encourage business investment to ease pressures caused by the Brexit uncertainty.
The plea follows new figures showing only the retail sector engaged in any significant investment in the last quarter, while manufacturers reported the first downturn in optimism and confidence since 2016.
Rising raw material costs have affected manufacturers as the pound slides in value and come amid slowing investment across a range of sectors. Construction has seen “substantive declines”.
Neil Amner, chairman of the Scottish Chambers’ economic advisory group, said: “Based on reported investment expectations, the slowing investment levels observed this quarter appear on course to be replicated once more in the last quarter of the year.
“Pragmatic future arrangements with the EU, particularly a status quo transition period, must be confirmed in order to create a stable operating environment for future business investment.
“The Scottish Government must continue to do their part to encourage business investment at home. Policy in key devolved areas such as skills and non-domestic rates must provide certainty and focus on encouraging long term investment from businesses into their operations.
“A stable domestic environment will aid significantly in ensuring that investment levels persist throughout the Brexit negotiations.”
The latest Chambers Quarterly Economic Indicator Survey found that 63% of manufacturing firms indicated that rising raw material prices were acting as a growing cost pressure.
In general, 21% of firms across the sample reported declining optimism, relative to 15% last quarter. This still suggests positive business confidence overall.
Mr Amner said: “Investment in Q3 and future expectations of investment are beginning to show signs of slowing across many of the analysed sectors.
“Although optimism remains relatively strong throughout the national sample, levels of business confidence have also softened relative to the second quarter.
“It’s particularly concerning to see the manufacturing sector report a negative score for optimism.”
Professor Graeme Roy, director at the University of Strathclyde’s Fraser of Allander Institute said: “This survey is further clear evidence of the importance of securing a smooth Brexit transition to protect Scotland’s economy.
“Whether you agree or disagree with the decision to leave the EU, it is essential that we have an orderly transition. The analysis undertaken by the Chambers of Commerce shows that it is vital that a deal is reached to enable firms to prepare and develop contingency plans.
“Crashing out of the EU in March next year threatens to severely impact on businesses right across the Scottish economy.”
On the UK’s exit from the European Union, Mr Amner, said: “A recent Chamber of Commerce survey illustrated that 62% of firms across the UK have not conducted a Brexit related risk assessment.
“This figure is higher in Scotland, at 67% of surveyed firms. Furthermore, 21% of firms across the UK intend to cut investment levels if a ‘no-deal’ scenario comes to pass.
“It’s difficult for firms, especially smaller businesses, to prepare without clarity on future arrangements. It is critical that the UK Government steps up to the plate to provide the certainty that business needs.
“Business communities need to see the UK Government working constructively with the whole of the UK and our EU partners to deliver certainty for business.”