Covid recovery now plateauing amid rising costs
The rapid return to economic growth following the removal of Covid-19 restrictions is now plateauing because of rising costs and lower consumer spending, according to the latest Scottish Business of Commerce survey.
Businesses are seeing a ‘cost of doing business’ crisis which is leading to an erosion of profits and cash flow. Firms are being forced to make tough decisions around investment, recruitment, and pricing.
Chambers president Stephen Leckie said: “Growth is now levelling off as the complexity of the challenges facing Scotland’s businesses start to take hold.
“Firms are becoming increasingly anxious about rising inflation, energy prices and cost pressures. For too many businesses, the focus is still simply on survival.
“Business finances are also being squeezed by Coronavirus Business Interruption Loan Scheme repayments, rising interest rates and significant business insurance cost rises.
“The prospect of impending additional tax burdens such as the Workplace Parking Levy, Transient Visitor Levy (Tourist Tax) and the Deposit Return Scheme are further cause for concern amongst already hard-pressed businesses.
“Economic growth is now plateauing because of these rising inflationary and cost pressures creating an increasingly uncertain outlook for businesses, with international trade and the global economy remaining volatile.
“The Scottish and UK Governments need to urgently rethink the impact of new and increased taxes on business if the economy is to be given the headroom it needs to survive this crisis and grow.
“As a priority, the UK Government should seriously consider the introduction of an SME energy price cap to protect smaller firms from some of the major energy price increases, in the same way that households have been supported.”
Mairi Spowage, director at the University of Strathclyde’s Fraser of Allander Institute, said: “Two years on from the first lockdown, it would be great to be optimistic about the economic prospects for 2022.
“Unfortunately, global uncertainties and the cost-of-living crisis, which are not unrelated to each other, have doused that enthusiasm with a bucket of cold water.”