Brexit uncertainty taking ‘severe’ toll on Scottish firms

Scottish Chambers of Commerce calls for brisk action to unlock investment for businesses. Picture: Danny Lawson/PA Wire

The latest Scottish Chambers of Commerce (SCC) economic indicator shows firms facing “severe” difficulties due to prolonged uncertainty around the UK’s position in relation to the European Union.

This, along with high business costs and a wider economic malaise, are factors discouraging businesses from investing or expanding in Scotland, the survey notes.

Despite the gloomy tone of the second-quarter snapshot, the SCC said Scottish companies were “getting on with the day job and demonstrating resilience in the face of persistent challenges”.

Overall, business confidence has made a slight recovery on the first quarter of 2019, when the UK faced a cliff-edge Brexit, but is generally lower than the same period a year earlier.

Tim Allan, chairman of the Scottish Business Advisory Group and president of the SCC, said: “Businesses are weighing the costs of the chaos caused by more dithering over Brexit and the burden is severe. Our members are crying out for the return of some sanity as they undertake the important role of creating jobs and paying taxes.

“Whoever the next Prime Minister will be, they must take brisk action to unlock investment and instil confidence back into the UK economy.

“Scottish businesses need to see steps being taken to avoid a disorderly Brexit and a responsible consensus reached as soon as possible on the Brexit process with the European Union.”

He added: “The majority of firms for all sectors in the survey are putting off investment and say this trend will continue over the summer months. All are desperate for some kind of resolution to Brexit before the 31 October deadline.”

Every sector in the survey increased wages over the quarter, apart from retail, showing that firms are having to pay more to retain talent as the supply of skilled workers eases.

The report found that the majority of sectors have suffered rising costs pressures from raw material prices and from overheads related to Brexit preparations. Some 64 per cent of manufacturing firms and 52 per cent of construction businesses listed rising raw material prices as their top cost pressure.

Allan added: “Although some sectors are reporting fewer difficulties finding staff relative to recent quarters, businesses continue to report persistent challenges in recruitment.

“We would urge the UK government to ensure that the future immigration system takes into consideration the necessity for firms in Scotland to be able to access talent as efficiently and seamlessly as possible.”

The survey was based on the responses from some 350 firms.

The findings are mirrored in the latest quarterly economic outlook from KPMG, also published today. The firm noted that Scotland’s economy was facing a widespread slowdown across most sectors, as prolonged Brexit uncertainty and global headwinds take their toll.

Its study points to weak growth for the remainder of the year, driven primarily by depressed business investment as firms delay spending decisions.