‘Sombre’ survey shows Scottish businesses struggling but outlook remains upbeat

“What is clear is that Scottish businesses remain resilient and optimistic” – Alan Shanks, head of Scotland at Addleshaw Goddard.

Scottish business fortunes took a distinct turn for the worse in the first quarter of the year, as firms cut back on investment and recruitment and sales sagged, a “sombre” survey today reveals.

The latest Addleshaw Goddard Scottish business monitor, which is produced in partnership with the University of Strathclyde’s Fraser of Allander Institute, paints a grim picture for the opening three months of 2024. Cost pressures continued to bite despite inflation easing, with 83 per cent of firms in Scotland seeing their costs increase over the quarter. That compares with 78 per cent in the previous quarter.

Across almost every measure, firms reported deteriorating business conditions. All of the survey’s regular activity measures - sales, new business, employment, capital investment and exports - were in negative territory for the first time since the end of 2022. The vast majority of businesses expect economic uncertainty, staff availability and political uncertainty to be important or very important over the next three months - up considerably compared to the last quarter.

Alan Shanks, is head of Scotland at Addleshaw Goddard, which produces the business monitor in partnership with the University of Strathclyde’s Fraser of Allander Institute. Picture by Renzo Mazzolini Photography

Despite that, firms are increasingly upbeat as they look ahead, with the expected volume of business over the next six months remaining positive, along with positive expectations of new business activity, turnover and employment.

The poll of about 400 firms from across the economy found that “delivering long-term economic growth” was top of the wish-list, selected by 72 per cent of businesses, followed by “tackling labour and skills shortages” (45 per cent), “reducing UK business taxes” (43 per cent), and “investing more on infrastructure” (39 per cent).

Alan Shanks, head of Scotland at Addleshaw Goddard, said: “Among some rather sombre figures, what is clear is that Scottish businesses remain resilient and optimistic, and are doing their utmost to drive the economic recovery that we hope to see over the course of 2024. The positive outlooks for the next six months show that, and my colleagues and I see it daily from clients in every sector. However, these latest results show just how important proper stewardship of the Scottish and UK economy is to the Scottish business community.”

Meanwhile, UK food and drink producers outperformed all other sectors in both output and new order growth in March and were the primary drivers for the wider manufacturing sector’s first expansion in output in more than a year, according to the latest Bank of Scotland UK sector tracker.

The report, which was also published today and covers around 1,300 companies, shows that of the 14 sectors monitored, food and drink manufacturers saw the fastest output growth last month, with a reading of 59.1, up from 51.8 in February. A figure above 50 indicates expansion, while a reading below that level denotes contraction. However, of the seven manufacturing sub-sectors monitored by the tracker, only three - chemicals, food and drink manufacturing, and industrial goods manufacturing - saw output grow.

Food and drink producers reported the first increase in their own costs since April 2023 during March - a trend that, if it persists, could challenge any future price-cutting plans.

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