Liz Cameron

Resilience of Scotland’s businesses will be key to making Brexit work

Here we are, days away from the one that had been marked for our departure from the European Union. There may yet be further delay. However, time is nigh that all of us – whether we own or manage a business, work for one or rely on those who do – must at least have a clearer direction of travel.

The process that started when voters in favour of leaving the European Union just edged those who weren’t has been a wild ride. Remember one of the first major events to take place after the result was the resignation of the then prime minister, David Cameron – and even that wasn’t the top story of the day.

If you could have planned the worst Brexit process ever, arguably this one undertaken by our parliamentarians in the past two years has bested it. The old saying goes, “you can’t please all of the people all of the time” but the ongoing shambles that has accompanied Brexit negotiations has pleased no-one, at almost any time.

The impact on our economy has been clear, but yet there remain some bright spots which confirm the resilience of so many companies in Scotland. The level of unemployment was recently reported to be at an all-time low, while the number of people working in Scotland is close to a record high. But while these indicators suggest that the economy is thriving, there are still 18,900 more people on Job Seeker’s Allowance or Universal Credit than there were last year.

This is important because we face a massive disconnect between employers – from farms to restaurants and hotels to the NHS – and workers from Europe who have historically filled thousands of available jobs. Now more than ever, educators and policy makers must work with businesses to ensure there are sufficiently skilled workers available to meet the gap that will widen once freedom of movement ends.

Ahead of Brexit, the Scottish Chambers of Commerce’s most recent Quarterly Economic Indicator survey revealed a worrying decline in confidence and investment, almost as if companies had pressed a “pause” button. Construction, manufacturing, retail/wholesale and tourism companies all reported that raw cost inputs contributed to additional pressure. This rise in costs is undoubtedly affected by the value of the pound, which has weakened significantly since the result of the Brexit vote. Nor has the fall in the value of sterling delivered a corresponding upside. The Office for Budget Responsibility (OBR) recently confirmed this has only provided a “modest” boost to net UK trade.

The manufacturing sector reported the biggest hit from Brexit uncertainty, with business confidence at the lowest level since 2012. Firms in this sector reported an unexpected fall in orders from Scotland, the rest of the UK and internationally at the end of last year as well as a decline in profitability. Looking ahead, they also saw sales, investment, exports and profits on a downward trajectory as fears of border delays, supply chain break down and export tariffs played havoc.

The whisky industry is Scotland’s major manufacturing industry, with exports valued at £4.7billion last year – a robust increase of almost 8 per cent on the previous year. As the industry’s trade body recently pointed out, Scotland has been selling whisky to the world for over 150 years and this is unlikely to change as a result of leaving the EU. However, the EU market takes 30 per cent of our whisky exports.

Domestic industries that don’t have as many obvious links to Europe such as construction nevertheless reported effects of Brexit. While orders and sales remained positive at the end of last year, overall investment levels slowed. The sector remains resilient, however business confidence has been easing and investment declining. Total employment levels from Q3 2018 to Q4 also showed a worrying swing from positive to negative territory. Future employment expectations will remain low until investment driven by renewed confidence in the UK’S economic future take hold.

The challenges facing the Scottish high street and retailers are well known. Online sales have undoubtedly impacted the fortunes of bricks-and-mortar retailers. The resilience of Scotland’s businesses will be key to making Brexit work. Low investment levels in the last 18-months means there is pent up demand to spend. This investment will underpin much needed economic growth across the country. But this will only happen if the uncertainty over future trade with the EU is, if not ended, then reduced. The UK government must redouble its efforts to create an environment of business certainty and clarity. This is what will ultimately determine whether the Scottish and UK economy is surviving or thriving.