The latest findings from a leading Scottish business survey by the Scottish Chambers of Commerce (SCC) shows Scottish businesses and the economy faltering under increasing cost pressures and declining business confidence (Philip Toscano/PA)
19 January 2023

‘Worrying picture’ for retail and tourism services over price rises – survey

19 January 2023

The retail and tourism industries have the highest number of firms in Scotland facing a hike in prices amid a widespread dip in business confidence, a new report has shown.

The latest data from a business report by the Scottish Chambers of Commerce (SCC), which looked at 310 firms in November and December last year, showed 82% of respondents said they intend to raise prices over the next quarter, a successive record high for the survey.

The report said the retail and tourism sectors had the highest number of businesses indicating future price rises, at 77% and 76% of firms respectively.

A total of 94% of respondents were SMEs: businesses with fewer than 250 employees.

There can be little doubt that recessionary effects are dragging the Scottish economy away from recovery and growth

Stephen Leckie, president of the SCC, said the UK and Scottish governments need “to urgently support SMEs by providing relief packages and a clear economic plan”.

“There can be little doubt that recessionary effects are dragging the Scottish economy away from recovery and growth,” he said.

“The survey results paint a particularly worrying picture for the retail and tourism sectors with contractions in future sales and investment intentions.

He said as relief packages come to an end, such as the UK Government’s Energy Bill Relief Scheme, which ends in March, businesses are “extremely concerned, particularly on energy prices which continue to be volatile”.

The report, however, showed firms’ energy bills have halved since the previous quarter because of the relief scheme, which took effect from October 2022.

It means, however, that labour costs have now taken precedence as the leading cost pressure, cited by more seven in 10 firms (72%).

Mr Leckie said this includes “persistent challenges” over access to labour and retaining talent for firms”.

While the survey showed the UK Government’s energy bills relief scheme helped businesses, Mr Leckie claims the subsequent “the lack of further support is a major cause for concern”.

The consensus now is that the UK and Scottish economy are in recession: and the only debate among forecasters is exactly when it starts and how many quarters long it will be

“The successor to the energy bills relief scheme from March will see an 85% drop in the financial envelope of support which will fall short for thousands of Scottish businesses who are seriously struggling,” he said.

“While we welcome the 12-month duration of this package, the value is nowhere near enough and that means for some firms, energy will now be a cost too far.

“We would urge the UK Government to revisit the relief package urgently.”

Concern over fuel costs and raw material prices remains high, both being cited by six in 10 firms in the survey.

And while concern from inflation has eased for a second successive quarter, the report showed it remains high with eight in 10 firms (80%) saying so over the final quarter.

The next highest concerns, according to the figures, were interest rates (50%) which has seen nearly a 15% increase since last year’s third quarter.

And the bleak figures mean business confidence, on balance, has fallen compared to the previous quarter, SCC said, with a more significant fall compared to last year.

On a sectoral basis, every sector reported a fall in confidence with retail and tourism seeing the largest fall when compared to the previous quarter.

This Government will always be on the side of business. This is why we are providing them and other non-domestic energy users with an unprecedented £18 billion package of support this winter

Commenting, Mairi Spowage, director at the University of Strathclyde’s Fraser of Allander Institute, said: “The consensus now is that the UK and Scottish economy are in recession: and the only debate among forecasters is exactly when it starts and how many quarters long it will be.”

She said while the UK Government has put in place help, “there is much more pain still to come in April” with the Energy Bill Discount Scheme announced last week being “much less generous than the scheme in place before the end of March”.

Ms Spowage added: “Labour market costs are also a significant part of the story.

“The latest data for wage growth in the UK published this week shows that pay in the private sector increased by 7.2% in the three months to November.

“In the last few months we have seen falls in the number of vacancies in the UK compared to the heights of the summer, but there is still an incredibly tight labour market: making vacancies very hard to fill and pushing up costs.”

A UK Government spokesperson said: “This Government will always be on the side of business. This is why we are providing them and other non-domestic energy users with an unprecedented £18 billion package of support this winter.

“On top of this, we have pledged to continue energy support from April onwards through our Energy Bills Discount Scheme.

“This will be at a lower rate to reflect recent price trends and to reduce taxpayer exposure to volatile energy markets.

“A higher level of support will be provided to energy and trade intensive businesses.”

Along with businesses, the Scottish Government has repeatedly called on the UK Government to take urgent action where it holds the key policy levers to do so

A Scottish Government spokesperson said: “The Scottish Government is supporting businesses by helping them to cut costs in a number of ways.

“These include delivering the lowest poundage in the UK for the fifth year in a row, reducing the business rates due and ensuring around 250,000 non-domestic properties in Scotland continue to be liable for a lower property tax than elsewhere in the UK.

“Along with businesses, the Scottish Government has repeatedly called on the UK Government to take urgent action where it holds the key policy levers to do so. This includes a reduction in VAT, targeting support with energy bills at businesses who need it the most and an extension of the Coronavirus Business Interruption Loan Scheme and other loans.”

The best videos delivered daily

Watch the stories that matter, right from your inbox