'Cost of doing business crisis' overriding concern for Scottish firms but confidence edges higher

The “cost of doing business crisis” remains the overriding concern for Scottish firms, according to a new report which also suggests that overall sentiment may have returned to positive territory.

The Addleshaw Goddard Scottish Business Monitor is produced in partnership with the University of Strathclyde’s Fraser of Allander Institute and was first carried out in 1998. It surveyed 400 firms from across the economy and found the net balance of all core business activity indicators in the final quarter of 2022 was negative, for the first time since early 2021. However, on average, firms are slightly more optimistic about their expected volume of business over the next six months, while there were also positive net balances in expectations for the level of employment and turnover in the coming six months.

Alan Shanks, head of Scotland at Addleshaw Goddard, said: “Scottish businesses are resilient and it is reassuring to see that overall sentiment has returned to the black as we get into 2023. However, no one can be under any illusions about the continuing impact of the ‘cost of doing business crisis’ and the barriers to growth in individual sectors as well as the overall economy. The value of the Scottish Business Monitor is to take the pulse of businesses across the economy, in good times and difficult times, and then look at what can be done to improve the situation. Whether it is policy levers or actions that businesses can take for themselves, both require ingenuity and support, financial and otherwise, to make an impact.”

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The monitor was released as a separate survey indicated that business confidence in Scotland has fallen to its lowest recorded point for 14 years. Sentiment tracked by accountancy body ICAEW’s latest monitor for Scotland put confidence at -27.8 on the index, the lowest score since 2009, and second weakest in the UK behind Yorkshire and the Humber.

David Bond, ICAEW director, Scotland, said: “These are sobering findings for Scottish businesses, with confidence crashing to levels not seen for 14 years. As our companies grapple with tough economic conditions and political turbulence, they must still contend with financial and labour market challenges, which the [monitor] indicates are weighing heavily on business sentiment.”

Alan Shanks, head of Scotland at Addleshaw Goddard, says Scottish businesses are 'resilient'. Picture: Renzo Mazzolini Photography