WARY FIRMS IN LIMBO
7% of the whole UK economy but this relates to values of companies so it’s not so clear cut to calculate what the cost will be to Scottish firms.
“Next week the stocks may rally. The fact the UK Government has gone ahead without OBR scrutiny is unprecedented and has created nervousness about their plan.
“Maybe they did not think they were going to like what the OBR were going to say about it.”
Colin Borland, director of devolved nations at the Federation of Small Businesses, said: “The world of international financial markets might seem remote from the day-to-day pressures facing most small businesses.
“But, if interest rates continue to rise, as it looks certain they will, that will have real-world consequences.
“First, business finance will become more expensive to service – and, of course, every extra pound that goes into loan repayments is a pound not going into staff wages or being invested in the business.
“Similarly, if hard-pressed households see their mortgages and other loans becoming less affordable, they’ll have less to spend in their local economy, hitting footfall and turnover.”
Economists also warned levels of productivity in Scotland were already behind the rest of the UK and the fiscal event could make that problem worse.
Dave Hawkey, senior research fellow at IPPR Scotland, said: “The overwhelming evidence is that the UK government’s budget was bad for the economy, bad for people, and bad for Scotland – all while the very richest disproportionately benefit from tax cuts.
“The economic impact of Truss and Kwarteng’s decisions makes a recession in Scotland more likely, or deeper, and that will put further businesses and jobs at risk. The UK Government must U-turn.”
Shelagh Young, of Scottish think tank The David Hume Institute, said: “The immediate effect will be people eating out less, going to the cinema less, buying fewer clothes but in terms of a precise and specific thing that’s going to be particularly bad for Scotland, productivity is what business should be looking at.
“One of the things we can say, because it’s well-researched, is one of the factors that undermines productivity is when employees are unhappy. If people are stressed and their health is poor, they are going to be less productive. We have seen from our research prior to the fiscal event, more than half of Scots are in that position.
“They are so worried about their finances it’s affecting their mental and physical health so you can definitely make the argument that Scotland is going to be hit by a wave of people underperforming at work as a result of the fiscal event.”