The latest Scottish Chambers of Commerce (SCC) Quarterly Economic Indicator survey for Q1 of 2019 released in April shows the health of the Scottish economy weakened considerably in the first quarter of this year. With the backdrop of an uncertain global environment and the cloud of Brexit hanging over the UK economy, key Scottish industrial sectors have experienced an investment slowdown as business costs and Brexit preparations take top priority.
“The prospect of a no-deal Brexit has undoubtedly taken a toll on business confidence in Scotland in the first quarter of 2019. Companies in Scotland are caught in a pincer movement of business challenges. On one hand, businesses are faced with increased cost pressures such as rising costs due to currency weakness and higher wages, and on the other they are hit by the dampening effects of political turmoil caused by the ongoing uncertainty of our future relationship with the EU”, commented Tim Allan, Chairman of the Scottish Business Advisory Group and President of Scottish Chambers of Commerce.
He added, “there is an immediate urgency to deal with Brexit, which is hampering our ability to compete on the international stage. We see this borne out in the decline in confidence, difficulties in recruitment and challenges in exporting. Furthermore, restraint on plans to invest will do nothing to solve Scotland’s ongoing productivity challenge which requires sustained levels of investment in skills and training if we are to see the shift the economy needs.”
“This latest Scottish Chambers of Commerce Quarterly Economic Indicator shows that Scottish businesses remain relatively resilient despite uncertain trading conditions. The lack of clarity about the UK’s terms of exit from the EU continues to cast a shadow over day-to-day decision making…”
The survey has shown some evidence of resilience of Scottish businesses, but it is clear from the survey results that pressure on Scottish firms is rising, with increased costs due to inflation, currency volatility, Brexit preparations and the prospect of increased taxation remaining across all sectors.
Commenting on the report’s findings, Professor Graeme Roy, Director at the University of Strathclyde’s Fraser of Allander Institute, said: “This latest Scottish Chambers of Commerce Quarterly Economic Indicator shows that Scottish businesses remain relatively resilient despite uncertain trading conditions. The lack of clarity about the UK’s terms of exit from the EU continues to cast a shadow over day-to-day decision making, with businesses clearly struggling to make long-term plans in such times.
“The manufacturing industry experienced a continued decline in export orders, as an uncertain global economy and UK’s prolonged negotiations with the European Union, start to impact on company order books. The tourism sector experienced a noticeable fall in the number of visitors coming from the European Union and the rest of the world, in comparison to the same numbers for Q1 2018. ‘Staycations’ from Scottish visitors remained the only positive visitor trend for the sector. Boosting levels of international trade is crucial for the Scottish economy and maintaining a business-friendly trading environment with the European Union will act as a critical enabler of Scotland’s future exporting potential as well as our ability to attract investment and visitors to Scotland.