Scottish firms flag inflation risk despite business sentiment remaining positive

Scottish firms are increasingly worried about inflation and supply chain pressures despite positive expectations for activity levels, employment and turnover.

All sectors of the Scottish economy recorded positive net balances for their volume of business in the first quarter of 2022, according to the Addleshaw Goddard Scottish Business Monitor - published in partnership with the University of Strathclyde’s Fraser of Allander Institute.

The report, which surveyed 500 firms in April from across the economy, noted that this positivity is expected to continue over the next six months.

Overall business sentiment remained positive, with all core indicators, except export activity, remaining optimistic.

However the study found that the growing impact of inflationary pressure and supply chain issues is 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.

Suzanne Moir, partner and specialist in energy and transport at Addleshaw Goddard, said: “The overall positivity shown in this report is good news and reflects what we are seeing and hearing from our own clients and contacts in all sectors of the Scottish economy.

“Businesses are adapting despite a combination of challenges, demonstrating both the resilience and innovation of these businesses.

“However the impact of rising prices, particularly in relation to energy, can be felt in all areas of our personal and business lives. The consequences of these price rises are already being felt, however one by-product will undoubtedly be an acceleration of the energy transition.”