Business confidence in the North-east of Scotland has taken a significant hit following the recent Budget, with levels dropping to those last seen during the COVID-19 pandemic.
This stark revelation comes from the latest Quarterly Economic Survey conducted in the region by Aberdeen & Grampian Chamber of Commerce (AGCC), in which only 27% of businesses in the North-east anticipate an increase in turnover in the upcoming months – marking the lowest figure since 2020.
The findings reveal that worries regarding taxation have surged on the risk register for businesses in the area – with 78% of North-east companies identifying this as a hurdle to growth, rising from 48% just half a year ago.
The data shows a significant divergence between North-east Scotland and the rest of the UK, showcasing a fifteen-percentage-point difference, as the region navigates yet another tax hit on the energy sector in addition to the hike in employers’ national insurance contributions.
Due to the various challenges facing businesses, 60% of North-east respondents intend to raise prices over the next three months, the highest level since Q4 2022.
It seems that the cost of hiring staff plays a significant role in this inflationary trend, with 86% of companies in the region citing labor expenses as a major and deteriorating concern. This figure is eleven percentage points above the UK average of 75%.
Russell Borthwick, Chief Executive at Aberdeen & Grampian Chamber of Commerce, said: “The Labour Government came to power promising to grow the economy and be a friend of business.
“Six months in, the reality is feeling very different for firms across the UK, and many of the challenges appear to be magnified for companies operating in the North-east of Scotland.
“The results of this survey – which is the first opportunity for our membership to pass judgment on the new government – are a damning indictment of policies being pursued on energy, employment, and tax.”
He added: “Firms of all shapes and sizes are telling us the national insurance hike is particularly damaging. Businesses are already cutting back on investment and say they will have to put up prices in the coming months.
“The Government is rightly coming up with long-term strategies on industry, infrastructure, and trade. But those plans won’t help businesses struggling now.”
Findlay Anderson, a partner at Gilson Gray, said: “Only 27% of North-east companies are projecting profit growth in the next quarter – a four-year low that compares unfavourably to the 40% of UK respondents anticipating profit increases.
“More than half of respondents in our region expect profitability to decline during this period, compared to less than a third across the UK.
“For some time, we have been forecasting the negative impacts of successive governments’ policies and taxation on the North-east’s oil and gas industry. Over the past few quarters, this has translated into a gradual but undeniable decline in local business economic confidence.”
Shevaun Haviland, Director General of the British Chambers of Commerce, said: “To help businesses, we need to see quick action in three specific areas. Firstly, ministers should accelerate business rate reform to create a system that incentivises investment.
“We also need the Government to speed up infrastructure investment, to help SMEs in supply chains across the country. Finally, it’s crucial to support exports, prioritising a better trading deal with the European Union.
“Without urgent Government action to ease the pain on businesses, the challenging economic landscape will get worse before it gets better.”
The QES stands as the UK’s most extensive and longest-running independent survey of business sentiment, conducted by firms within the Chamber of Commerce network across the nations and regions, with a total sample size exceeding 4,800 businesses.
