Fraser of Allander report paints mixed picture for Scottish business

Scottish business activity remains weak but long-term economic confidence is largely positive despite a backdrop of rising costs, falling investment and political uncertainty, a report today suggests

Malcolm McPherson is senior partner at Addleshaw Goddard in Scotland. Picture: Contributed

The Fraser of Allander Institute’s (FAI) business activity index has fallen 9 percentage points since the last quarter, but remains in positive territory at +5 per cent. Financial services reported the strongest growth while manufacturing slipped into negative territory.

Of some concern, almost a third of businesses have scaled back all new investment due to ongoing economic uncertainty.

Malcolm McPherson, senior partner at Addleshaw Goddard in Scotland, which has produced the business monitor in partnership with the FAI, said: "These figures show firms are not relaxed in spite of incremental growth and remain focused on weathering the storm that is Brexit, scaling back growth ambitions and investment accordingly.

"There are some exceptions, such as the energy sector including both traditional oil and gas, and the renewables industry. Energy is a key strength of Scotland’s economy, and continues to attract investment for growth and long-term sustainability.

"An insular approach may protect businesses to a certain extent, but this directly impacts supply chains and businesses who are vulnerable to shifts in buying behaviour, a trend that is beginning to establish itself in these figures, which puts future growth in question."

Professor Graeme Roy, head of economics and director of the Fraser of Allander Institute, said: "Coming after last week’s negative growth figures for Scotland, today’s survey shows that despite all the Brexit uncertainty, Scotland’s businesses are remaining resilient.

"But today’s survey of Scottish business sentiment shows that over 90 per cent of Scottish firms expect that the ongoing economic uncertainty will have an 'important' or 'very important' impact on their operations in the coming months.

"Unblocking the Brexit deadlock is absolutely crucial and will enable businesses to get back to what they do best, creating jobs, investing in the future of their operations and growing into new markets."

Launched in 1998, the Scottish business monitor is one of the country's most trusted trackers of business sentiment and activity.