05 Apr 2023
By Stuart Patrick, Chief Executive of Glasgow Chamber of Commerce
Whether it’s an economic strategy pursuing traditional growth or the progressive definition of a wellbeing economy, favoured by the Scottish Government, a positive, confident business community is a necessity. The British Chambers of Commerce Quarterly Economic Strategy (QES) for Q1 2023 shows that is still a long way off.
The bad news is that from over 5,200 firms surveyed, across the UK between February 13 and March 9, the majority sees no improvement in weak business conditions. More firms on balance are reporting their net cash flows in decline especially in retail and hospitality. Three quarters of firms said there had been no increase in their investment bringing no end to a six-year trend in depressed investment intentions. If we are to see any chance of boosting economic productivity that sentiment has to change.
The bad news continues when it comes to energy costs and staff recruitment. Shevaun Haviland, BCC Director General said that ‘the (UK) Government’s new energy support package (introduced on April 1) represents a drop of 85% in the financial help available to businesses. We reiterate our calls for increased, targeted support for those firms who desperately need it’.
The situation in the labour market is equally challenging with Ms Haviland emphasising that “the lack of skilled labour is having a corrosive effect on our economy”. While the UK Government has made some moves to include new construction jobs in the Shortage Occupation List governing immigration, those moves are nowhere near enough.
The better news is that, after a dramatic drop in business confidence in the second half of 2022, QES Q1 is showing a marked improvement for the year ahead. Over half (52%) of firms think their turnover will grow over the next 12 months, up from 44% in Q3 2022. Inflationary pressures are also showing signs of easing albeit very modestly. The percentage of firms expecting their prices to increase fell five percentage points from 60% to 55% compared to Q4 2022 results.
While the survey was carried out before the Chancellor’s Spring Budget statement the BCC is not expressing much confidence that his measures were enough to shift the pattern of low business investment or to tackle persistent skill shortages. The political turmoil of the Autumn may now have passed and the worst phase of interest rate rises to tackle inflation may also be behind us but the QES shows there is a long way to go before we can say that business sentiment has recovered.
In Scotland a new First Minister and a revised Cabinet also have an opportunity to reset the relationship with the business community knowing that the business mood is fundamentally fragile. I appreciate that it has been controversial to suggest that business leaders did not feel much warmth from the Sturgeon administration but we now have the words of some senior members of her team confirming that business priorities were not well appreciated.
It was heartening to see Cabinet Secretary for Wellbeing, Economy and Energy Neil Gray welcoming his first meeting with business representatives at the end of last week. There is real scope to construct a fresh relationship even if continuity is the declared principle.
At the very least it would help if no further measures emerged such as the proposals for an alcohol advertising ban or for continued domestic rent controls which are damaging to key industries and for which there had been no significant consultation with the business community. Measures like these undermine the faith business has in the Scottish Government’s commitment to growth.
Far better would be more action on the basic issues in education, skills, transport infrastructure and support for key sectors that will grow investment and exports. The obvious option would be a determined campaign to deliver on the existing National Strategy for Economic Transformation. That would be a tangible contribution in rebuilding the business confidence we will need if every household in Scotland is to secure a better standard of living.
This article was first published in The Herald on Wednesday 5 April 2023
