Rising prices alert
GDP revised upwards but firms’ optimism patchy
Revised GDP estimates for the fourth quarter of 2021 show the Scottish economy grew by 1.6% in the fourth quarter against the previous estimate of 1.3%.
Economy Secretary Kate Forbes said the updated statistics demonstrate the resilience of Scottish businesses and the wider economy.
“This is despite the emergence of the Omicron variant at the end of last year and the necessary public health restrictions which were put in place to mitigate the spread,” she said.
The data followed mixed messages in the latest surveys of business confidence. Overall business sentiment remained positive in Scotland in the first quarter, with all core indicators, except export activity, remaining optimistic, according to the Addleshaw Goddard Scottish Business Monitor.
The report, produced in partnership with the University of Strathclyde’s Fraser of Allander Institute, noted that inflationary pressure and supply chain issues are expected to have a marked effect on businesses, with more than one-third expecting to reduce operations due to higher energy prices, up from one-fifth in the last three months of 2021.
Businesses in the wholesale & retail (48%) and transport and storage (47%) sectors had the highest share of firms expecting to reduce operations due to energy prices.
The latest CBI SME Trends survey of business sentiment during the same period was more downbeat. It found the sharpest drop in optimism among the UK’s SME manufacturers since the onset of the pandemic.
The employment picture looked more positive, with headcount growth picking up pace.
Ben Jones, CBI lead economist, said: “It is no surprise that SME manufacturers are feeling less optimistic this quarter.
“Growth in new orders is expected to come to a halt over the next three months, cost growth is historically strong and concerns over materials shortages continue to rise. This is leading to unprecedented price rises and a hit to investment plans.