SCC QUARTERLY ECONOMIC INDICATOR: Q1 2023 REPORT

Thank you if you shared your thoughts in our latest survey in partnership with Scottish Chambers of Commerce (SCC). The latest findings confirm that the beginning of 2023 provided welcome respite for some sectors of the economy more so than others, after a difficult end to 2022.

However, this comes from a very weak base, and while confidence has generally increased, this is yet to translate into an overall improvement of business conditions. Most Scottish SMEs still report no improvement to sales, cashflow, and investment. The survey also indicates that many businesses are still struggling in the face of rising cost pressures and high inflation, as well as continuing to face challenges regarding access to the labour market.

KEY FINDINGS:

• INFLATION CONCERNS PERSIST: Concern over inflation remains high among all firms and has seen little movement over the quarter, with still around eight in 10 firms (82%) reporting increased concern from it. On a sectoral level, financial and business services was the only sector surveyed where a lower number of firms reported less than at least eight in 10 at 77%.

• COST PRESSURES REMAIN HIGH:

o 75% reported increased cost pressures from energy costs

o 70% reported increased cost pressures from labour costs, including salaries

o 55% reported increased cost pressures from fuels such as diesel and petrol

o 50% reported increased cost pressures from raw material prices

• CASHFLOW & PROFIT CHALLENGES: On balance, more firms reported a fall (43%) in cashflow than an increase (31%), reflecting the difficulties faced by notably the retail and tourism sectors. Across the entire survey, the manufacturing sector was the only sector to report growth for cashflow and not a contraction. Similarly, the services sector was the only sector to report growth in profits.

• LESS FIRMS PLANNING TO RAISE PRICES: The number of firms indicating that they intend to raise prices in the next quarter has fallen slightly compared to the previous quarter. This remains high with still over seven in 10 firms (73%) stating that they will raise prices in Q2 2023.

• CAUTIOUS LABOUR MARKET: Recruitment difficulties have seen a slight drop of five percentage points, from being reported by 52% of firms in Q4 to 47% for this quarter. Over half of all firms (57%) reported no staff changes over the quarter, with 57% again saying that they do not expect staff changes to change in Q2 2023.

Read the report here

"There is too much uncertainty, people are frightened to come out and spend. Utility prices are way too high, mortgage rates up, business rates now an issue due to drop in threshold. Way too much new regulations, STL, DRS, alcohol advertising, possible visitor levy. We need help not more pressures." - Tourism firm in the Highlands