OPTIMISM among Scottish
retailers and wholesalers has plunged in the latest quarter amid inflationary pressures fuelled by the Brexit vote, a survey reveals.
The Scottish Chambers of Commerce survey, published today, also highlights growing recruitment difficulties for firms across “almost all” sectors of the economy.
Scottish Chambers’ economic advisory group chairman, Neil Amner, cites anecdotal evidence from businesses of a “steady drift of EU workers out of the UK” following the Brexit vote, and declares: “For Scotland, that has to stop if our current recruitment problems are to be reversed.”
While noting businesses
generally remain “resilient”, and flagging its belief that the economy north of the Border will continue to grow, Scottish Chambers highlights “some stark warnings about the potential challenges ahead” from its latest survey.
It cites the squeeze on household finances caused by a surge in inflation, which has been fuelled by sterling’s weakness as a result of the Brexit vote, and a consequent fall in households’ real incomes against a backdrop of weak nominal pay growth.
Mr Amner says: “Businesses are… highlighting longer-term threats to success from factors such as falling real incomes and rising recruitment problems.”
Scottish Chambers’ survey, conducted in conjunction with Strathclyde University’s Fraser of Allander Institute, shows a sharp acceleration in the rate of decline of optimism in the retail and wholesale sector north of the Border in the latest three months. It also shows nearly half of firms in this sector experienced falls in profits and revenues.
Scottish Chambers says: “Other sectors will be watching with
interest to see to what extent the challenges here could spill over into their own areas of business.”
Only 21.7 per cent of respondents in the retail and wholesale sector reported a rise in optimism in the latest three months, with 43.5 per cent experiencing a decline in confidence and the remainder reporting an unchanged position.
The rounded balance of 22 per cent experiencing a decline signalled a much faster fall in
optimism than in the previous three months, when a net eight per cent reported a drop in confidence.
A net 28 per cent of respondents in the retail and wholesale sector reported a fall in sales revenue, with 47.8 per cent recording a decline and only 19.6 per cent experiencing a rise. Meanwhile, 45.7 per cent of firms in this sector reported a fall in profits in the latest quarter, and only 21.7 per cent achieved an increase.
Mr Amner said: “The retail sector is perhaps most exposed to pressures on household budgets. It is therefore worrying that almost half of retail [and wholesale] respondents are reporting a fall in revenues and profits. Supply chain price rise pressures will compound that issue.
“Consumer demand drives around three-quarters of Scotland’s economic growth, so unless the recent falls in real earnings are reversed, there is a risk the impact could spread to the wider economy.”
Noting evidence that the low unemployment rate in Scotland may be impacting on businesses’ ability to hire the talent they need, Mr Amner declares recruitment difficulties are “growing across almost all sectors of the economy”.
He adds: “Those recruitment pressures underline the need for early agreement on the rights of existing EU workers to live and work in the UK and for the UK’s future migration policy to be driven by business need.”
Scottish Chambers’ survey shows a strong performance by the manufacturing sector north of the Border in the latest three months, particularly on the export front, with firms in hiring mode. It also points to solid showings by financial and business services, and tourism.
It paints a mixed picture of the construction sector, highlighting a rise in sales revenue but falls in new public sector contracts and profits.
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