Staff shortages and supply-chain issues pile pressure on Scottish businesses

Shortages of staff and supply-chain issues are putting significant pressure on Scottish firms, according to a report.

More than half (52 per cent) of medium-sized businesses in Scotland have warned they are being hit by delays from foreign and domestic suppliers.

BDO’s latest Rethinking the Economy survey also found that a third say they may need to reduce services or product lines long term as a result of stock and staff shortages.

The survey showed that a lack of overseas workers, exacerbated by both the pandemic and Brexit, was the number one issue in recruiting, as well as a lack of available regional talent.

Issues with receiving stock from overseas suppliers is having a significant impact on Scottish businesses. Picture: Steve Parsons/PA.

More than a quarter of mid-sized firms in Scotland now plan to increase wages to attract new joiners, which could have a knock-on effect on already-high levels of inflation.

Faced by a perfect storm of challenges, almost all respondents in Scotland and across the UK said they intended to reduce their product lines or services to help manage staff shortages, with a third of those in Scotland admitting these may be longer-term changes.

However despite the issues, Scottish companies are still optimistic about the rate of recovery, with more than half believing it will take 12 months or fewer for their business to return to pre-pandemic revenues.

Martin Bell, partner at BDO Scotland, said: “It’s reassuring to see that Scottish businesses are keeping a firm eye on recovery in the next 12 months, despite the considerable challenges being posed throughout the supply chain.

“It is perhaps unsurprising to see that as a result of some of these issues, more than two fifths of businesses in Scotland plan to on-shore suppliers in the next three to six months. However, the resilience of the mid-market should not be overlooked and maintaining the appetite and ambition for growth will be crucial for businesses as we navigate what will almost certainly be a difficult few months ahead.”

Deceleration

Last week Parsley Box, the Edinburgh-based meal delivery firm, warned that it had been hit by labour issues throughout its supply chain, severely knocking its growth plans.

In a trading update, the group told investors that it had taken the "difficult decision" to reduce investment in marketing, warning that this was likely to continue until the "expected short-term supply chain constraints recede".

The firm, whose shares began trading on London's Alternative Investment Market (Aim) in March, delivers ready meals that do not need to be stored in a fridge or freezer, direct to the "underserved baby boomer-plus consumer", broadly defined as those aged 60 and over.

The company told investors: "The group, together with the wider retail sector, is experiencing labour issues throughout its supply chain and has been significantly restricted by stock availability at circa 50 per cent of plan.

"Customer service is a core value of the group, and therefore the board took the difficult decision to reduce investment in marketing, and this is likely to continue until the expected short-term supply chain constraints recede. As a consequence the group now expects full-year revenue to be circa £25 million, slightly ahead of last year, with a consequential impact on the group's loss before tax."

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