Building business to help consumers
◆ Roundtable event hosted by law firm CMS hears about strong opportunities for firms offering good-value products and services
Consumers have weathered the economic storm and are ready to spend – but systemic challenges in the Scottish economy are making it difficult for businesses to take full advantage.
Sebastian Burnside, chief economist at Natwest, told a roundtable discussion hosted by law firm CMS Scotland that there are strong opportunities for businesses who can deliver good-value products and services to consumers. He added that the dip in gas and electricity prices would continue to push inflation lower, while consumers would also benefit from falling interest rates.
Savings banked during the pandemic have helped create positive conditions for a consumer bounceback, Burnside said, alongside strong wage settlements which have increased disposable household incomes.
Although consumers have dipped into savings to meet rising living costs, and wage rises are expected to cool in 2024, consumer confidence appears relatively strong. Shopping for best value and a savvy approach to coping with interest rate rises means the majority have not pushed themselves into unsustainable financial positions, Burnside said.
However, the impact of high inflation and spike in remortgages has widened the gap between those retaining confidence and those struggling.
Burnside observed: “The economy is full of contradictions – there are strong asset levels, but also high numbers of insolvencies. We have the highest levels of wage growth in a generation and very low unemployment, but also record levels of energy debt and significant food bank use.”
Businesses at the round table stated that systemic challenges in the Scottish economy – especially housing supply, planning issues and workforce problems – make it tough for businesses to benefit in the current environment.
These challenges include a serious housing shortage, especially for first and second-time buyers, and renters. The cost of delivering housing schemes is an acute problem, alongside a struggling planning system.
Local authority planning departments charged with making major development decisions are under-staffed and under-resourced, leading to delays and frustrations for developers and investors.
The roundtable heard that challenges in getting planning applications through is a wider symptom of a business environment that could be more supportive. Some businesses turn to “can-do cities” like Manchester, which are seen as more open to investment and development.
The Scottish Government and wider public sector were urged to demonstrate more clearly that Scotland is open for business, and to recognise the wider value that the business community can deliver. However, the business community itself must explain better how development and investment can be a force for good to improve people’s lives across Scotland.
Mairi Spowage, director of the Fraser of Allander Institute, said the Scottish Government should stresstest big new policies against their likely economic impact. She said issues over the Deposit Return Scheme, short-term lets, and rent freezes would have benefited from serious consultation with business, to look at economic, social and environmental impacts in a balanced way.
Another systemic problem for business in Scotland is the large percentage of economically inactive people – more than one-third of working age adults, and up to 50 per cent in some areas.
Mental health and wellbeing challenges, especially among younger people, is another growing issue. However, these big challenges could become real opportunities if health issues are properly addressed and people are able to rejoin the workforce.
Despite the challenges, Scotland is still seen as a good place to do business, and to start a business. There is more stability as a result of cautious bank lending in the wake of the 2007-8 crash, while the investment community is strong, especially for early-stage businesses, with a longstanding angel investment community and targeted investors such as the Scottish National Investment Bank and Business Growth Fund.
Allan Wernham, managing director of CMS Scotland, said: “The roundtable was a great barometer of business opinion. Overall economic conditions are relatively good, with consumers ready to spend for value.
“However, the ability of businesses in Scotland to respond effectively to the opportunities available is hampered by the wider business environment – and challenges around housing, planning, and workforce must be addressed to unlock future economic growth.”
The roundtable was a great barometer of business opinion... challenges must be addressed to unlock future economic growth
For more information, go online to cms.law/scotland