The latest Scottish GDP data last week confirmed what we already really knew: Scotland is at the start of a recession. The economy contracted in the July-September quarter, driven by contractions on both consumer-facing services and manufacturing.

This comes as households and businesses this week feel the winter cold really starting to set in, as we all eye our thermostats with concern and pull on another jumper.

The question now is how long this downturn is likely to last. In a consumer-driven economy like the UK, this is inextricably linked to how confident consumers feel about spending their money – and, of course, whether they have the spare disposable income to spend on more discretionary items when so many are struggling just to afford the basics like food and fuel.

The announcements in the recent Autumn Statement about the cap post-April will reassure consumers to a certain extent – although still represents an eye-watering increase from the year before which will contribute to increases in measured inflation.

However, as we continue to highlight, there was no such protection announced for businesses of any size. Many businesses, in the run-up to the energy announcements in late September, had seen their energy bills (or the quotes for energy contract renewal) increase by three, four or even five times.

While the caps funded by the Government between October and March have been very welcome and have helped some keep their head above water, they have been implemented in such a way by energy companies to increase uncertainty for many organisations.

The pain on this is being felt already by many businesses, but for others it is in the pipeline for their renewals over the next six months. The latest Scottish slice of the Business Insights and Conditions Survey, a regular survey of businesses across the UK by the ONS, provides (as the name would suggest) very useful insights into what may be coming.

Of those who answered the question, 22 per cent of businesses said they were already on variable tariffs for gas while a further 18% said that their deal was expiring by December 2022, and a further 19% on top of that saying their deals were expiring in March 2022. This leaves around 40% of businesses with a deal that will expire after March 2023.

This can be looked at two ways. One, that many businesses may have secured deals that protect them from the currently high gas prices, and if they come down to an extent over the next months then they will have more ability to ride out the storm.

However, while prices may come down from current highs, they are going to remain very high by historical standards. That means many businesses surviving now through a difficult winter may finally crack when new gas deals come into place over the next 12 months. But it is not universal doom and gloom – this data does give us some hope as well.

Although it has come down over the course of 2022, there is still a net positive balance of businesses saying that performance will increase over the next 12 months as opposed to decrease. The sectors most positive are information and communications (which includes IT firms), administrative and support services, and professional, scientific and technical services.

Those most negative about prospects are wholesale and retail, accommodation, food services and construction. The first two sectors are those which have suffered most through the two years of Covid and their resilience is likely to be tested again. Construction seems to be one of the areas that has been most affected by price input inflation and supply shortages in recent months, and coupled with the likely downturn to come in the property market, it is not surprising that the mood is somewhat gloomy here.

What about the prospects for the labour market? In the latest wave of the survey, 43% of businesses had been reporting difficulties with recruiting staff. This rises to over half when considering businesses in the hospitality industry.

So, in line with the tight labour market, the issues right now are about a lack of labour rather than a joblessness crisis.

However, all forecasts that are being produced about the recession we are at the start of suggest there will be an increase in unemployment as a result of the economic downturn.

In the immediate term, the survey suggests that more businesses are looking to increase the amount of employees they have during December (15%) than are planning to decrease (9%). But underneath these figures we can see that there are more businesses in the hospitality sector planning to reduce staff (21%) than increase (18%) – even during this crucial Christmas period.

Businesses will no doubt be looking with interest at the Scottish Government’s Budget next Thursday – hoping, perhaps for more signals of help than they received from the UK Government’s Autumn Statement.

At the very least, there will be an expectation that the help available on business rates in England will be replicated here.

Professor Mairi Spowage is the director of the Fraser of Allander Institute