Energy prices head firms’ concerns for growth
Rising energy prices top the list of concerns among Scottish businesses which continue to be challenged by a range of cost pressures.
Supply chain issues and staff shortages are also expected to hold back Scotland’s economic growth this year, according to a survey.
Only 7% of firms are expecting strong growth during the next 12 months, compared to 10% in the last quarter, and 17% in second quarter of 2021, according to the latest Scottish Business Monitor from the Fraser of Allander Institute.
One in five businesses expects to reduce operations this year due to the increase in energy prices.
The construction and transport & storage sectors (91%) had the highest share of businesses expecting increased prices in the next 12 months, followed by manufacturing (88%) and wholesale and retail (84%).
Only 8% of businesses reported that they were finding it easy to source available goods and services.
The survey also revealed that 81% had vacancies that were proving difficult to fill and 23% were facing difficulties holding on to staff.
Mairi Spowage, director of the Fraser of Allander Institute, said that firms remained optimistic, with volumes improving in the final three months of 2021.
“However, inflationary pressures and rising energy prices are a concern for firms,” she said. “Growing uncertainty throughout global supply chains is also causing problems for businesses across all sectors, particularly those in industries such as manufacturing.
“Difficulties for firms in hiring new staff also persist, with some firms expressing challenges in their ability to retain existing staff levels.
“However, it is positive to see the lasting effects that COP26 has had on business attitudes, with the majority continuing to signal their commitment to reaching their net-zero targets.
“Businesses continue to see the opportunities and rise to the challenges of incorporating more sustainable practises, with more firms now putting the onus on suppliers to meet sustainable requirements.
David Kirchin, head of Scotland at Addleshaw Goddard, which sponsors the survey, said: “Scottish firms expect business volume to increase. However, they also see challenges ahead, whether linked to rising energy prices, supply chain challenges or the hiring and retention of people.
The ‘war on talent’ shows no sign of ending. Businesses continue to deal with inflationary pressures on salary costs while having to focus on making themselves places where people want to spend their working time.”