The latest Scottish Chambers of Commerce’s Quarterly Economic Indicator survey has shown rising levels of investment across Scottish businesses, as expectations grow amongst firms for a strong 2018.
The survey, produced by the Scottish Chambers of Commerce Network in collaboration with the University of Strathclyde’s Fraser of Allander Institute, found that while some sectors remain fragile in terms of overall business confidence, firms are looking to invest in capital and training to improve their prospects in an uncertain economic environment.
Linked to recent GDP figures, Construction remains an area of concern, with overall sales revenue down, alongside public-sector orders. However, there are some encouraging signs for the sector, with private commercial orders up significantly, and key financial indicators such as cash flow and profitability returning to positive levels. The retail and tourism sectors also continue to face challenging domestic conditions.
Reacting to the results, Neil Amner of Anderson Strathern, Chair of the Scottish Chambers of Commerce Economic Advisory Group, said:
“The results of SCC’s first quarterly economic indicator of 2018 show that while the economy has not been without challenges, most sectors are reporting increasing levels of investment across capital and training.
“A number of factors will underlie this. Legislative change, whether through industry wide regulations such as the GDPR, or through reforms to the Business Rates system via initiatives such as the Business Growth Accelerator, is encouraging firms to upskill their staff and push forward on capital investments.
“This upswing in investment trends does not come without expectation however. Every sector in our report, from Construction to Tourism, expect to see sales revenues increase in the second quarter, with firms anticipating that this investment will gain rapid returns.
“Although some sectors are reporting lessened levels of recruitment difficulties in comparison to previous quarters, such as financial services firms recording a drop of ten percentage points, these still remain relatively high in areas like construction.
“In terms of wider business concerns and cost pressures, certain areas remain stubbornly challenging particularly in manufacturing as the cost of raw materials reflects rising global competition. Given the limited ability of firms to pass on these costs to customers, this may also be a further reason for rising investment, as businesses look to compete on customer experience and efficiency.”
“It is clear that businesses are adapting to the changing economic environment and have positive expectations for the quarter ahead. To achieve the gains that companies are anticipating, we look to policymakers to mirror the agility and adaptability shown by the private sector, particularly on areas such as increasing Scotland’s exporting performance, creating a favourable tax environment and an attractive migration policy, which meets the needs of Scotland’s economy.”
In his foreword to the report, Professor Graeme Roy of the Fraser of Allander Institute comments on the changes to business investment:
“…whilst weak business investment has been a feature of Scotland’s economy in recent times, the survey suggests that levels of investment have increased significantly over the last year.
As we have previously highlighted, in times of uncertainty, it is important that businesses focus on the drivers of growth that they can control such as investing in their own productivity and efficiency, and in developing the skills of their workforce.”