Economic Survey of Scottish Business

Ayrshire Chamber of Commerce shares latest results of the Quarterly Economic Survey of Scottish Business

Ayrshire Chamber of Commerce are delighted to share the latest results of the Quarterly Economic Survey of Scottish Business carried out by Scottish Chambers of Commerce in partnership with the Fraser of Allander Institute.

The survey is the longest running data series of its kind and every Chamber across Scotland shares the survey not only with their members but the wider business community to encourage participation by a wide and varied range of businesses.

This quarter has seen 400 businesses respond with 70 coming from Ayrshire businesses, around 97% of the businesses who replied were SMEs with 250 or less employees. The survey was carried out between 12th February and 11th March 2024.

Cashflow & Profits: Q1 has seen a significant downturn in terms of cashflow and profits for firms, with sizeable contraction on balance recorded for both trends.

Investment: Investment trends remain largely frozen with 53% reporting no change to total investment and 52% reporting the same for training investment. In Ayrshire 50% of firms have investment on hold.

Labour Market: Labour market concerns have increased with 47% reporting recruitment challenges for the quarter compared to 40% in the last quarter. This has been driven by increases across the construction and manufacturing sectors. 80% of Ayrshire firms cite labour costs as a cost pressure which is up 8% on last quarter.

Sales: Nearly all sales trends saw growth on balance with domestic sales seeing the most significant increase compared to the previous quarter. However, rest of UK sales saw a slight contraction on balance.

Cost Pressures: The leading cost pressures remain the same as at the end of last year with labour costs (76%), energy costs (60%) and raw material prices (44%), with more companies raising concerns specifically on labour and energy costs.

Concerns: Inflation remains the leading business concern, being reported by 55% of firms. Taxation has seen a significant increase over the quarter, 55% of Ayrshire firms reported increased concern about taxation, an increase of 15% from last quarter.

Price Rises: More firms are indicating that they will raise prices this quarter compared to last, despite a 2023 low of 40% reported in Q4 2023. For this quarter, that has risen by 10 percentage points to 50% of all firms. 50% of Ayrshire businesses are expecting to raise their prices this quarter which is the same as last.

Comments from respondents in Ayrshire include:

“Increased competition from companies outside of the UK has made Q4/Q1 really difficult. We are up against low-cost manufacturers, and we have no ability to match these costs due to high overheads and tax. I believe we are on an unsustainable path given the overhead burden we have to endure.” – Oil & Gas Services Firm

“Customers do not want to pay increased prices due to material costs of manufacture and we are finding that prices have to remain the same as of three years ago even though inflation, rates and cost of goods from suppliers are unreasonably being inflated as well as undercutting from larger corporations/businesses severely affecting niche independents. The cost of doing business and sustainable growth in more deprived areas is unattainable especially in bricks and mortar retail when no support is being given to subsidise the survival of the High Street shops, trades and crafts. Micro and small businesses have no access to real financial help anymore to help grow, take on staff or make profit, it’s a struggle” – Retail Firm

“The pressures of the NMW increase fuel/energy costs and rising insurance costs are a big worry for our business” – Trades Firm

Ayrshire Chamber CEO Claire Baird commented:

“The latest insights highlight the cost pressures facing companies in all sectors. The persistently high cost of doing business is impacting cashflow and profitability which will hit the economy in the long-term.

“The operating environment – nationally and globally – is exceptionally challenging.

“Despite this, businesses are showing signs of resilience with business confidence and recruitment intentions remaining stable for the next quarter.”