The first quarter of 2024 has seen a significant downturn in cashflow and profits, a survey of Scottish businesses has found.
The quarterly economic indicator survey for the Scottish Chambers of Commerce found contractions in balance on both measures.
However business confidence remains in positive territory despite the economic headwinds.
Some 400 companies took part in the survey in February and March this year.
Stephen Leckie, president of the Scottish Chambers of Commerce, said: "The latest insights from Scottish business underscores the extreme cost pressures facing companies in all sectors.
"The persistently high cost of doing business is hammering cashflow and profitability, which will hit the economy in the long-term.
"The operating environment - nationally and globally - is exceptionally challenging.
"Geopolitics has moved up the agenda in boardrooms, underlining the critical role governments will continue to play to ensure smooth trading conditions.
"Red Sea disruption, unresolved global conflicts and emerging concerns on data sovereignty are live issues businesses and communities require clarity on.
"Despite this, Scottish businesses are showing signs of resilience, with business confidence and recruitment intentions remaining stable for the next quarter."
Professor Mairi Spowage of the Fraser of Allander Institute said: "Economic data in early 2024 is showing that the economy is likely to be recovering hesitantly as expected, following the contractions in growth in the final part of 2023.
"Some of this positivity is reflected in the survey published today.
"Despite some of the headwinds reported by businesses - including increasing employment costs - business confidence is still in positive territory.
"There are clear sectoral differences, as might be expected, with the retail and hospitality sector in particular having a subdued set of results.
"The increase in the national minimum wage coming in April, while positive for workers, is likely to impact particularly on these sectors."
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