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Optimism high in key financial services sector

Scotland's key financial and business services sector is enjoying sustained increases in economic activity, profitability and confidence, according to the first ever survey of its kind by Scottish Chambers of Commerce.

Taking the pulse of over 120 firms in the sector as an extension to its quarterly business survey, the SCC reports positive results in turnover, employment, profitability, investment, and the overall outlook for future economic conditions.

It says the findings confirm "a further strengthening of the Scottish economy's recovery". But it goes on: "Issues do still remain for Scottish businesses, especially business rates, with 35 per cent of respondents saying they were more important to their business now than in the previous quarter."

Over 50 per cent of firms indicated that domestic turnover (Scotland only) had increased over the past quarter, a net balance of +39.

Expectations of future turnover and profitability were strong, with 62 per cent of firms expecting a further increase in turnover in the current quarter, and 55 per cent anticipating higher ­profitability, rising to 64 per cent expecting profits to improve over the next year, a net balance of +47.

On employment, 29 per cent of firms said overall staff levels had risen over the past quarter, a net balance of +17, which the SCC said confirmed the trend identified by the Scottish Government.

But it went on: "One area of concern might be the relatively high level of youth unemployment nationally, given that 60 per cent of firms had not attempted to employ under-25s in the past quarter, and 72 per cent had not moved to recruit a graduate."

However, prospects for overall employment continue to look good, with only 4 per cent of firms expecting to see headcounts shrink over the next year, compared with 43 per cent that expect to recruit (+39).

A similar 43 per cent also expect to lift their capital spend over the next 12 months, a net balance of +31, which the SCC says backs up the UK Government's view that overall investment in the UK will significantly increase in 2014 and 2015. Half of firms said that rising wage costs were putting pressure on prices, while 39 per cent indicated that they plan to increase their prices in the current quarter, confirming another reported UK trend, that of rising real wages.

Liz Cameron, chief executive of SCC, said the sector was an integral element of our economy, representing over 15 per cent of total employment in Scotland.

" It is encouraging to see financial and business services expecting to increase their intentions to invest and employ. However, challenges still remain.

"Companies indicated that competition was the most important factor this quarter compared to the previous one, a positive sign for the industry, though this concern was followed closely by concerns over taxation and business rates.

"The Scottish Government is in direct control of business rates, a tax which continues to be one of the most significant issues for businesses.

"Although there is a commitment to review some aspects of it, we need a quickening of pace and urgency with a view towards wider reform. This tax affects most businesses in Scotland and reforming this could be a quick win."

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