SCOTTISH businesses are among the least confident in the UK as companies face a crisis around the cost of conducting business, a survey of chartered accountants has found.
Business sentiment tracked by the Institute of Chartered Accountants in England and Wales’ (ICAEW) monitor for Scotland for Q3 found confidence in negative territory, with only Wales recording a lower reading.
Scottish firms said that regulatory requirements and tax, the labour market and transport issues were taking their toll. Input price inflation has also hit the country’s businesses, leading to a rise in selling costs and salaries, the monitor noted.
With firms facing soaring energy prices and high inflation, ICAEW said households and companies would need support in the short-term to get through the next few months. David Bond, ICAEW director for Scotland, said: “After a strong recovery from the pandemic, Scottish business confidence is now in negative territory.
"Our companies are struggling with regulatory requirements, tax and labour market problems and weakening exports, and face a crisis from the cost of doing business. With inflation running at levels not seen for 40 years, ministers must provide targeted support for struggling businesses and households to keep the lights on this winter.”
Two in five businesses said they were being increasingly challenged by regulatory requirements with more revealing that they were being challenged by the tax burden than at any time since the monitor started. Meanwhile, the number of companies that said transport problems were a growing challenge fell from a high in Q4 2021, but “remained much higher than the historical average”.
The monitor also found that the number of companies with labour problems was double the historical averages, reflecting both the demand for labour and the departure of people from the workforce. In addition, businesses were responding by increasing salaries at the fastest rate for 14 years.
Input price inflation rose by 4.6 per cent year on year, the sharpest increase since late 2008. The same rise is forecast in the year to Q3 2023. Domestic sales in Scotland, however, grew by 6.4% year on year, in spite of the plunge in confidence, with a further 7.1% rise expected – the strongest outlook of any part of the UK.
Nationally, business confidence fell into negative territory, with sentiment at -5 on the index, down from its peak of 47 a year ago, with higher costs and significant skills shortages weighing down expectations despite a strong sales performance, ICAEW said.
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