Recession fear as Scottish economy ‘sits on a knife-edge’ - SCC

The business body’s leaders have called for tax breaks and certainty on the future of foreign workers amid signs that Scotland’s economy was slowing down even ahead of the ‘Brexit’ vote.

The SCC’s Quarterly Economic Indicator survey, carried out in collaboration with the University of Strathclyde’s Fraser of Allander Institute, suggested construction was slowing in the three months to 30 June, while tourism’s performance was found to be “markedly” worse than a year ago.

The report, published today, shows the Scottish economy generally was in a fragile state in the second quarter and reveals balances were down in the financial, business services, manufacturing and retail sectors as a sharp slowdown was felt in the overall growth of services companies –even those not involved with the already beleaguered oil and gas sector that has been hit by languishing global oil prices.

Asked for his view of the chances of the economy north of the Border going into recession, Scottish Chambers’ head of policy & research, Garry Clark, said: “I think in Scotland the economy is on a knife-edge. We have seen that over the last three reported quarters . Anything is possible in terms of tipping back towards a recessionary situation.”

His colleague, Neil Amner, chair of the Scottish Chambers of Commerce Economic Advisory Group, said: “Our survey shows that Scottish business performance was generally muted during the lead up to the EU referendum but of course the burning questions are how the vote for the UK to leave the European Union will affect businesses and what steps our Governments in the UK and in Scotland should take to ensure that Scotland’s businesses continue to be the dynamo of economic growth.

“There were some signs of weaknesses in investment and difficulties in recruiting skilled workers over the past three months and these are illustrative of concerns which may persist after the Brexit vote. Additionally, businesses in some sectors such as retail and tourism have been flagging up increases in costs, coinciding with the introduction of the National Living Wage in April this year. Meanwhile for larger businesses, the prospect of tax rises through the introduction of the new Apprenticeship Levy is on the horizon.

“The BrexIt vote does not come without its opportunities but business must be in the driving seat if we are to take advantage of these and, indeed, secure the stability that is needed to foster investment and deliver future growth. Central to future planning is the need for clarity on the future of talented individuals currently working in Scotland. Everyone must have the confidence that they will be able to fulfil their long term ambitions in Scotland, whether they currently live here or not. Scotland must become an even more attractive place to do business and must actively reach out to the world to create new trading and investment opportunities.

“Business is the engine of the Scottish economy and this is now the time to make sure that the engine is running smoothly and efficiently if we are to rise to the challenges of Scotland’s new circumstances. The Scottish and UK Governments must utilise all available powers to make businesses more competitive. In particular, they need to reconsider policies which have sought to impose greater burdens on business and instead use the ‘levers of power’ politicians so often talk about to actually support business and the wider economy, providing a strong and confident platform for future growth. For example, by cutting business rates, accelerating reductions in Air Passenger Duty and putting the Apprenticeship Levy on hold.”