Scottish recovery will be ‘marathon not a sprint’
Tim Allan: ‘rebound’
Businesses in Scotland can see the first shoots of recovery for the first time in a year as COVID-19 restrictions begin to lift, according to a leading quarterly survey led by the Scottish Chambers of Commerce (SCC).
However, Chambers president Tim Allan said the recovery will be “a marathon not a sprint”.
The SCC’s Quarterly Economic Indicator (QEI) for the second quarter of 2021 indicates more growth across all sectors surveyed, albeit, caution is still the watchword for many businesses.
- Pent up demand unleashed: All sectors have reported 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.
- Caution looking ahead: All sectors have projected positive expectations for Q3, on balance, 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 Q2.
- Faltering export sales: 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.
- Inflation pressures: All sectors have recorded increases in concern over inflation, which 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.
- Flat labour market: Most sectors saw a slight increase in employment, apart from retail, which saw no change over the quarter. Most firms, across all sectors, expect little change in Q3 which could result in sluggish jobs growth, with further challenges expected as the furlough scheme is withdrawn.
Tim Allan, president of the Scottish Chambers of Commerce, said: “The success of the vaccine rollout has enabled the easing of restrictions and the gradual reopening of the economy, unleashing pent-up demand in the economy.
“This has allowed some sectors to rebound more quickly than others, however, the route to economic recovery will be a marathon, not a sprint.”
Mairi Spowage, director at the University of Strathclyde’s Fraser of Allander Institute, said: “In April, we saw growth in the Scottish economy of 2.0%. This takes us above the previous post-pandemic peak in October. However, the economy still remains 3.7% below the pre-pandemic peak.
“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. This chimes with today’s survey results, which show significant negative impacts on exports.
“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.
“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.”