SCC QUARTERLY ECONOMIC INDICATOR: Q2 2023 REPORT

CHAMBER PRESIDENT ISSUES WAKE-UP CALL TO GOVERNMENTS AS BUSINESS INVESTMENT FLATLINES

Sarah Medcraf said: "With three quarters of businesses citing labour and energy costs as their leading cost pressures, it’s no wonder that investment is largely frozen. Whether this is investment in staff training or infrastructure and development, lack of investment in general is a real risk to any organisation in the medium to long term"

• LABOUR COSTS: Labour costs are now the biggest cost pressure and driver of price rises, cited by three-quarters of all firms.
• INVESTMENT: Growth is positive but significantly subdued, with most firms reporting no change to investment levels.
• HOUSEBUILDING: Due to pressures in the housing market, construction firms reported the largest contraction in housebuilding contracts since Q2 2020.
• INTEREST RATES: Interest rates are the second largest concern behind inflation, impacting 40% of all firms.

Inflation Concern Easing:
- Concern over inflation remains high among all firms but has eased generally over the quarter. Last quarter, it was at 80% but has eased slightly to 75%. On a sectoral level, at least seven in 10 firms in each reported increased concern from inflation with the construction, retail, and tourism sectors reporting the highest level of concern.

Labour Costs now the leading cost pressure:
- 75% reported increased cost pressures from labour costs, including salaries
- 74% reported increased cost pressures from energy costs
- 48% reported increased cost pressures from raw material prices
- 43% reported increased cost pressures from fuels such as diesel and petrol

Investment Largely Frozen:
- 29% of all firms reported increased total investment over the quarter, with 20% reporting a decrease. While on balance, this is an overall positive, 43% reported no change over the quarter.
- This freezing of investment is most apparent significant when it comes to training investment, with over half reporting no changes to funding for training staff (52%).

Tight Labour Market:
- Recruitment difficulties continue to be a significant challenge and have risen over the quarter, from 47% last quarter back to over half of firms (55%).
- Nearly 7 in 10 (69%) report that they don’t expect staff numbers to change in the next quarter, compared to only 24% that expect it to increase and 8% a decrease.

Read the full report here