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25 October 2017 • Sarah Medcraf

POSITIVE SCC SURVEY DATA UNDERLINES NEED TO GROW TALENT The latest results from The Scottish Chambers of Commerce’s Quarterly Economic Indicator survey show optimism amongst most Scottish businesses continuing to improve during the 3rd quarter of 2017, reaching levels higher than a year ago in construction, financial and business services, manufacturing, and tourism. The survey, produced by the Scottish Chambers of Commerce Economic Development Intelligence Unit in collaboration with the Fraser of Allander Institute of the University of Strathclyde, shows Scottish businesses remaining resilient in the face of significant policy uncertainty and a fragile Scottish economy which continues to grow at below trend levels. Professor Graeme Roy of the Fraser of Allander Institute, one of the report’s contributors, has warned that record high employment levels are increasingly leading to recruitment difficulties across most sectors, leading to dampened growth and increases costs. In a foreword to the report he said: “In such uncertain times, it is even more important that businesses focus on the long-term drivers of growth that they can control – including innovation, investing in productivity improvements, and developing the skills of their workforce.” The survey also showed that tourism was a stand-out performer over the third quarter of 2017 due to the weak pound’s effect on foreign holidays. By contrast there was cause for concern in the continued decline in the retail & wholesale sector in Scotland, with several indicators including sales revenue and cash flow continuing to decline along with employment trends, emphasising the added importance of a strong performance in the Q4 pre-Christmas period. Financial services also appears to be building on its strong start to 2017 albeit activity has yet to fully recover to where it was three of four years ago, while despite improving optimism overall activity in construction continues to remain relatively fragile. Neil Amner of Anderson Strathern, Chair of the Scottish Chambers of Commerce Economic Advisory Group, said: “The results in our third quarterly economic indicator of 2017 point to a broadly positive picture for Scottish business. However, the retail sector in particular continues to show decreasing sales, in addition to cashflow and profitability challenges. “This continues on from our findings in the second quarter which highlighted persistent issues in the retail sector. Levels of inflation have continued to impact on real terms wage growth, which has maintained pressure on household budgets and translated into recurrent challenges for this sector. “With the exception of retail, our results generally show broad optimism of varying levels across Scottish business. In particular, the Financial and Business Services sector has displayed strong, positive results – with sales and profitability at their highest levels for several years. Unsurprisingly, this has translated into increased optimism, with third quarter optimism levels higher than figures recorded across Q3 2015 and Q3 2016. “For many of our industries, recruitment difficulties continue to sit above the long term trend levels, exacerbated by the record high employment figures. Concerns continue to be raised by our members when it comes to seasonal workers and the attractiveness of the UK to EEA migrants during the uncertainty surrounding the Brexit negotiation process. “Furthermore, members in more traditional industries have highlighted issues in attracting younger workers. Businesses in sectors such as manufacturing must do more to reimagine their workplaces to attract future talent, by focusing on increasing autonomy and flexibility in their working practices.” Notes to editors: Scottish Chambers of Commerce’s Quarterly Economic Indicator engages with five of Scotland’s key business sectors: Construction, Financial and Business Services, Manufacturing, Retail & Wholesale, and Tourism. The Quarterly Economic Indicator is owned and produced by the Scottish Chambers of Commerce Economic Development Intelligence Unit, in collaboration with the Fraser of Allander Institute of the University of Strathclyde. This survey was conducted between 21 August 2017 and 14 September 2017. 384 firms responded to the Q3 2017 edition of the Indicator. KEY FINDINGS: Retail & Wholesale:
  • Significant difficulties this quarter for retail, following a significant period of decline.
  • Domestic revenue in retail has remained at a continuous negative net % balance since Q1 2017.
  • Cashflow has been at a negative net % balance since Q3 2015
  • Profitability has remained at a negative net % balance since Q4 2015.
  • Some positivity, with rUK and export sales at positive % balances.
The outcome of these difficulties is a higher % balance of businesses seeking to raise their prices than we have observed in the same quarters in both 2015 and 2016, though still less than in Q2 2017. Financial and Business Services:
  • FBS organisations are optimistic, a higher net % balance figure than those observed in the same periods in 2015 + 2016.
  • Profitability in FBS is in positive % balance territory for the first time since Q1 2015.
  • Total sales at strongest level since Q4 2014.
  • Cashflow has maintained a positive net % balance.
  • Private commercial orders up significantly from previous quarter + previous period.
  • Work in progress slightly lower than same period last year, but Q3 2017 is the highest figure by far since Q3 2016.
  • Concerns that training investment below long-term trends.
  • Optimism holding steady at positive % balance, in comparison to falling into negative territory in same period last year.
  • Aside from exports, all actual order metrics improved vs Q3 2016.
  • Some concern that investment levels maintain below the longer-term trends.
  • Growth in number of guests both domestically, from rUK and from outside the EU.
  • Significant increase vs previous quarter in number of businesses applying for credit, perhaps linked to increased investment expenditure.
  • Cashflow improved vs previous period + previous quarter.
Press Office: Shane Taylor | Business Intelligence Executive | 0141 204 8337 | 07795158137

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