Cutting the cost of doing business key in hard times

As we begin the New Year, trying to predict the direction of travel in the Scottish economy is a difficult task.

The Scottish Chambers of Commerce network conducts regular research with our member businesses throughout Scotland through our Quarterly Economic Survey and the results give us real time information on the challenges and opportunities faced by business and our economy.

At the start of 2017, businesses are telling us that there is a very finely balanced thread of optimism.

Four of the five business sectors that we monitor – construction, manufacturing, retail and wholesale, distribution and tourism – are feeling positive about the year ahead, but only by a small margin.

On the other hand, the largest sector – financial and business services – has indicated that it is feeling negative but, again, only marginally so.

In terms of actual performance, there are a range of good news stories, from a resurgence in exporting from the manufacturing sector to a sharp increase in visitors from outside of the EU in our tourism industry.

Even oil and gas businesses, which have not had their problems to seek over the last couple of years, seem to be indicating that the worst may be over and that some kind of recovery may be on the horizon.

Of course, all of this is against a very challenging background.

Stability has been in very short supply over the past few years and the prospect of the UK’s departure from the European Union and the political and economic consequences of last June’s vote are affecting businesses.

One example is the fall in the value of the pound, which, along with rising fuel and transport costs, is part of a range of factors that have led the retail sector to report its highest expectation of rising prices in almost four years.

This does concern us because rising prices can do two things – they can reduce the profitability and cash flow of a business, leading to falling levels of investment, and they can dampen consumer demand.

Each of these scenarios could in turn lead to downward pressure on economic growth and this is something that Scotland can ill afford.

Figures released earlier this month show that in 2016, the Scottish economy was growing at just one third of the rate of the UK economy as a whole.

On top of that, our employment rate is heading on a downward trajectory, whilst the UK’s has been heading upward over the past couple of years.

These are the reasons why I believe it is time for our Governments in Edinburgh and London to use their powers to help cut the cost of doing business in Scotland.

In particular, the rising cost of business rates must be cut down to size.

The fall in the value of the pound is likely to impact on consumer demand.