Scotland business

Business survey suggests Scottish economy 'still subdued'

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Scotland's economy remained "subdued" in the first quarter of the year, according to a survey of businesses.

Scottish Chambers of Commerce (SCC) found profitability and cash flow continued to be "challenging", while pressure on prices was high.

However, there was a mixed picture in terms of firms' optimism.

It was in negative territory in retail and wholesale and tourism, but finance and business services had the most positive outlook since the end of 2014.

SCC's quarterly economic indicator suggested tourism sales revenues fell across the board for the second consecutive quarter, despite an increase in customer numbers. Investment and employment also declined over the quarter.

More than a third (36%) of retail and wholesale businesses reported falling optimism, with declines in cash flow, sales employment, profitability and capacity.

The construction sector reported a slight weakening in performance, with optimism falling to its lowest level since the third quarter of 2014.

Despite this, a quarter of the construction firms who responded said they were hiring staff, although they continued to face recruitment difficulties.

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The financial and business services sector reported its highest levels of optimism since the final quarter of 2014.

The report suggested this could reflect the fact that more than a third of oil and gas businesses were now more positive about the future.

Meanwhile, the manufacturing sector reported growing optimism after a mixed year in 2016.

Domestic orders and sales revenues were flat but firms said their performance had been boosted by strong export sales.

The report also found positive signs for jobs in manufacturing, with about 87% of respondents indicating employment had either increased or remained the same over the quarter.

However, 45.5% reported difficulties in recruiting, particularly technical/skilled staff.

'Targeted tax cuts'

SCC economic advisory group chairman Neil Amner said the political situation with Brexit, a general election and moves for a second Scottish independence referendum were creating "uncertainty".

He added: "As we approach a general election, we expect the political parties to pledge targeted tax cuts, potentially including a temporary cut in VAT, in order to bolster consumer demand."

A total of 470 firms responded to the the survey, which was carried out in conjunction with the Fraser of Allander Institute between 20 February and 13 March.

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