The fallout of the unprecedented costs crisis has followed businesses and households into 2024. The United Kingdom has faced greater inflation difficulties than other major developed economies placing great pressure on our ability to invest, spend and grow.  

Inflation has simultaneously squeezed the bottom-line of businesses and hit the spending power of consumers. The record-breaking inflation rate of 11.1% in October 2022 was a 41-year high but has thankfully eased closer to the Bank of England target, yet there is still a way to go. Interest rates also saw a surge from record lows of 0.1% in December 2021 to 5.25% today, hitting borrowers and businesses alike.

READ MORE: UK economy seen at risk of recession after fall in output

Whilst recession is on the tip of our tongues, the EY Item Club noted in its winter forecast that a long period of economic stagnation should begin to fade this year as falling inflation, potential interest rate cuts and tax reductions create momentum for growth in 2024 and 2025.

All that being said, challenges remain which indicate uncertainty for the year ahead. The latest Scottish Chambers survey shows that over half of firms are still holding back investment, with inflation, interest rates and the labour market cited as significant concerns.

It is not a comfortable outlook. Fundamentally the UK economy has failed to deliver solid, high-quality growth, with governments north and south of the border yet to implement a comprehensive set of cohesive policies that could boost productivity and enable expansion.

The recent confirmation that growth contracted in November due to lacklustre retail sales and stubborn inflation rates also indicate that the costs crisis is far from being over. Whilst we cannot completely rule out further stagnation in 2024 given geopolitical headwinds, we are quite clearly stuck in a low growth cycle.

READ MORE: Interest rate cuts seen by EY ITEM Club after inflation data

The recent Budget announcements from the UK Government and Scottish Government have left businesses pondering whether the economy features as a real priority.

Take last month’s Scottish Budget as a case in point. We wanted to see a Scottish Government Budget that prioritised investment and business support. Instead, many sectors in the business community were left feeling neglected with the overall budget doing little to bolster the outlook of the economy.

Skills shortages and availability of talent continue to act as a major barrier for business expansion and yet we see well received schemes such as the Flexible Workforce Development Fund being scrapped, a reduction in funded university places, and cuts to college budgets.

Further tax divergence whilst somewhat expected was disappointing and will impact our ability to attract and retain the talent that business needs. Anyone in Scotland who makes more than £28,850 will now pay higher taxes than workers elsewhere in the UK and many are asking is that the right approach as consumers are already squeezed?

The freezing of the poundage rate – this was the least that was expected from the Scottish Budget, but the support has not gone as far as industry needed.

READ MORE: Household incomes to improve amid ‘turning point’ for economy in 2024

Let’s take medium-sized and larger premises. The business rate will rise to its highest level since the devolution of the tax 25 years ago, leaving shops with massive increases in their rates bills in April.

It will push up the cost of operating stores and places a question mark over the viability of some shops, undermining efforts at high street and town centre rejuvenation. The level of this hike contradicts Scottish government promises to "use business rates to boost business".

Businesses urgently need government to adapt their approach on rates and ensure the focus is on growth, investment, and competitiveness.

Our latest economic indicator paints a clear picture: Scotland’s economy is stuck in a low growth cycle. Persistently high inflation, higher borrowing costs, frozen investment and ongoing global uncertainty are placing businesses under significant pressure.

These issues must be addressed by all parties at the next General Election with businesses expecting clear plans which will boost economic growth and investment. The real test political parties will be assessed against is whether we are being listened to and real action is taken to back business growth.

Liz Cameron is chief executive of the Scottish Chambers of Commerce