Sandra Dick: Scots businesses are feeling the pain in Spain

FOR seven years Sheila Dafereras has travelled to and from Greece, liaising with the hard-working and talented jewellery designers there and picking the most eye-catching trinkets for her George Street shop.

In Athens and at workshops in the Greek countryside, she got to know each one individually. And her knack for choosing pretty items to sell meant they were able to continue to make their jewellery while her business, Asimi, flourished.

Across town, French food specialist Simon Lloyd has spent years building up his business too, importing cheese, wine and other delicacies. Four times a year he’d cross the Channel to source cheeses and cold meats, mustards, jams and olive oils to sell wholesale to some of the city’s finest restaurants and at his Morningside shop, Henri.

And while they brought home the charcuterie for Scottish consumers, other small businesses across Edinburgh and throughout Scotland have headed in the opposite direction, taking everything from whisky and seafood to clothes, electrical engineering and financial services.

For centuries trade has flourished along a two-way street between Scotland and her continental cousins. But now, as the eurozone crisis begins to bite, it appears our links with Europe are being tested to the limit.

Of course for many of us, the notion of a eurozone crisis may well boil down to a simple heated debate over whether to choose Spain or Portugal for our annual summer exodus. After all, it’s not as if the fine detail of Europe’s financial mess is really going to make much difference to us. Is it?

But yesterday the Organisation for Economic Cooperation and Development issued a stark warning that the eurozone and UK could be entering a fresh recession. It piled on the pain with a prediction that the eurozone economy would shrink in the fourth quarter by one per cent, and by 0.4 per cent in the first quarter of next year.

And it could spiral even further out of control should Greece or another struggling European sovereign state default on its debts – leaving banks then fighting to recoup astronomical losses by tightening lending and further slowing down all our economies.

“We are all affected,” warns Stuart Mackinnon of the Federation of Small Businesses in Scotland. “You don’t need to be an exporter or importer to be worried about the impact of the crisis in Europe.”

While the blow to major importers and exporters – Scotland exports around £9.6 billion of goods and services to the eurozone every year – would be dramatic, closer to home small businesses are already feeling the chill of a struggling European economy.

“The more obvious thing to consider is tourism, which is tremendously important in Edinburgh in particular,” says Stuart. “If there’s a lack of confidence, then European tourists are less likely to take expensive foreign holidays to places like Scotland.”

That alone, of course, means less money flowing into the city, affecting shops, hotels and services that depend on the tourist trade to stay afloat.

As importers, Simon and Sheila have been witness to the changes in Europe over the past few years.

“All the time you have to watch what the euro is doing,” says Sheila. “When I opened my shop the euro was at 1.44 to the pound. Then it went to nearly one euro to the pound and it threw all my calculations for the business out of the window.

“Fortunately it’s up at the moment. But all these massive changes make it hard to plan ahead.”

The Greek economic meltdown has had a direct impact personally – her husband is Greek and has close family affected – and within her business. “One of my key designers is quitting and moving to London to find work as there’s nothing left in Greece.

“She is in a country in the middle of the most horrendous crisis. She can’t sell any products in Greece. One of my main suppliers isn’t producing any more so I have to find someone else.

“I have agents who buy from companies in Europe and they are struggling too. They want to put up prices because of what is happening, which means we will have to pay more.

“And it’s very expensive to go to Greece now to source items. Then when I import I have to use a carrier, but their prices are soaring too. So my margins are being chipped away.

“It’s soul destroying.”

Simon agrees that the instability of the eurozone makes running a business even harder. “We are completely exposed to the euro, 100 per cent,” he says.

“At the moment the euro is up and actually in our favour at around 1.15, 1.17 to the pound, but there’s no stability and it can change a lot in just a couple of days.

“We’re not a huge business but if you are spending a five-figure sum every month in euros that all makes a difference,” he adds.

He hunts for ways to cut the business’s overheads – whether it’s slicing back on electricity, swapping credit arrangements or trimming his usual four trips a year to France to meet suppliers down to just one.

“I feel part of my head is occupied by a currency dealer, I think about it all the time,” he adds. “While we’re reasonably okay just now, there’s no stability.”

In spite of it all, the business has expanded with a shop in Stockbridge. “I take the attitude that you have to try to grow too. But it’s not easy.”

Indeed, adds Stuart Mackinnon, the outlook for the future isn’t optimistic. “Confidence is a key issue,” he says. “Never mind not buying a new fridge freezer, people aren’t even buying a midweek bottle of wine. Until people get comfortable spending money again, there’s not going to be the upturn in the economy that we need.

“We need the powers-that-be to make sure the impact on Scottish business is mitigated as much as possible.

“While we’re not in the eurozone, it doesn’t mean we’re not hit by it.”

Top export markets

THE US is Scotland’s largest export market, worth £3.2 billion a year. However, the eurozone countries as a whole exceed that dramatically. Exports to the Netherlands, France, Germany, Belgium, Spain, Eire and Italy together add up to £7.7bn.

In total, Scotland exports around £9.6bn of goods and services to Europe every year, so any dramatic changes in the economy of Europe have serious implications throughout Scottish industry and business.

Whisky is a major Scottish export, with sales overseas worth £109 per second. However, recent sales in Europe are said to have remained flat, with a sharp fall in Greece and Spain. Greece increased duty on whisky three times last year to raise revenue.

Meanwhile, business leaders’ organisation the CBI recently warned that the eurozone crisis had knocked confidence. It said that if the economy slipped back into recession, 60 per cent of bosses surveyed would cut investment and make staff changes to cope.