CASHFLOW & PROFITABILITY DECLINE AS HIGH COSTS HAMMER BUSINESSES

•    CASHFLOW & PROFITS DECLINE: Q1 has seen a significant downturn in cashflow and profits, with sizeable contractions recorded across four of the five sectors.

•   RECRUITMENT CHALLENGES: More businesses are reporting challenges in recruiting staff, increasing to 47% for the quarter compared to 40% in the last quarter. However, recruitment intentions remain stable for the next quarter.

•  MORE PRICE RISES ON THE HORIZON: More firms are indicating that they will raise prices this quarter compared to last, rising by 10 percentage points to 50% of all firms.

•  COST PRESSURES RISING: The leading cost pressures remain labour costs (76%), energy costs (60%) and raw material prices (44%), with more companies raising concerns specifically on labour and energy costs.

•  INVESTMENT STILL FROZEN: Over half of firms have reported investment freezes and do not expect this to change next quarter due to economic uncertainty.

 Stephen Leckie, President of the Scottish Chambers of Commerce said:

“The latest insights from Scottish business underscores the extreme cost pressures facing companies in all sectors. The persistently high cost of doing business is hammering cashflow and profitability which will hit the economy in the long-term.

“The operating environment – nationally and globally – is exceptionally challenging.

“Geopolitics has moved up the agenda in boardrooms underlining the critical role governments will continue to play to ensure smooth trading conditions. Red Sea disruption, unresolved global conflicts and emerging concerns on data sovereignty are live issues businesses and communities require clarity on.

“Despite this, Scottish businesses are showing signs of resilience with business confidence and recruitment intentions remaining stable for the next quarter.”

On Tax, Stephen Leckie, said:

“Closer to home, businesses continue to express major dissatisfaction with tax policy direction from Scottish and UK Governments. Businesses are concerned about the impact of income tax divergence between Scotland and rest of UK in attracting and retaining talent. Scotland’s additional regulations such as the tourism tax is also a cause for concern which is increasing the cost of doing business.

“The message from businesses is clear: we need Governments north and south of the border to reduce the tax burden.”

Click on the red button to read more ….