Business News Round Up (30/06/2022)
Rising inflation weakens outlook for growth in 2023
Scotland’s economic growth forecast for 2023 has been revised down due to the impacts of cost increases on consumers and businesses, and the likelihood that these will persist for longer than previously thought. This is according to the latest quarterly Economic Commentary from the Fraser of Allander Institute at the University of Strathclyde. In the Deloitte-sponsored Economic Commentary, the Institute forecasts growth of 3.8% in 2022 and 0.5% in 2023. The outlook has significantly worsened for 2023 since the last set of forecasts in March 2022. The Commentary examines the latest data on the global, UK and Scottish economies, including detailed analysis of the latest GDP, employment, and inflation figures. The analysis in this quarter’s Commentary shows that consumers are starting to modify their spending behaviour, with over half of consumers reporting that they are spending less on non-essentials. In addition, a third of consumers say they are spending less on food and other essentials. It is not just food and fuel, however. The analysis shows that the costs of property, both rental and ownership, are also increasing significantly. Price increases across the board mean that the impacts are being felt differently by different types of consumers. A younger demographic are more likely to say that property costs and public transport services have increased in price, whereas older age groups are more likely to say that food and fuel have gone up.
Business confidence at 15-month low as cost of living squeeze intensifies
Businesses reported a fall in confidence this month, declining 10 points to 28% according to the latest Lloyds Bank Business Barometer. This is the lowest level since March 2021 when the economy emerged from the second COVID-19 wave. This fall in business confidence comes as inflation reaches its highest level for 40 years as the cost of living pressures on households continue to grow. However, the level of confidence for June is equivalent to the barometer’s long-term average of 28% and consistent with some historic GDP growth and the continued relative stability of business confidence around the long-term average. Firms adjusted their optimism with increased caution on trading prospects as 49% of businesses (down from 56% in April) were more optimistic about the economy, while 27% (up from 23%) were less optimistic about the economy. This resulted in a fall in the net balance by 11 points to 22%, the third decline in the past four months. However, close to one in two firms (49% down from 55%) reported stronger trading prospects, while 15% (up from 13%) were less positive, leading to an 8-point fall to 34%, back to its March level. The proportion of businesses planning to increase their prices was marginally lower than last month with 56% of firms anticipating higher prices for their products or services in the coming year, decreasing one point. An unchanged 5% of businesses expect to cut prices.
Scottish business confidence dips, but prospects on the up
Business confidence in Scotland fell 15 points to 27% in June, according to the latest Business Barometer from Bank of Scotland Commercial Banking. Companies in Scotland reported higher confidence in their own business prospects month-on-month, up 18 points at 49%. When taken alongside their optimism in the economy – down 47 points at 5% – this gives a headline confidence reading of 27%. Scottish businesses flagged a range of growth opportunities for the next six months, including investing in their team (36%), evolving their offering (34%) and entering new markets (27%). Around 1,200 businesses are surveyed monthly – including 87 businesses in Scotland – with the overall ‘balance’ of opinion weighing up the percentage of firms that are positive in outlook against those that are negative. A net balance of 16% of businesses across the country expect to increase staffing levels over the next year, down 23 points on last month. Across the UK, business confidence fell 10 points during June to 28%. Firms’ optimism in the economy dropped 12 points to 21%, while their outlook on future trading prospects was down eight points, at 34%. The net balance of businesses planning to create new jobs also decreased, by nine points, to 28%.
https://www.insider.co.uk/news/scottish-business-confidence-dips-prospects-27355781
Scottish employers feeling impact of skills shortages with poor staff wellbeing, increased workload and decreased profitability
MORE than three quarters of Scottish businesses (77%) report that skills shortages mean reduced output, profitability, or growth, according to The Open University’s Business Barometer 2022 published in partnership with the British Chambers of Commerce. The Open University’s annual report provides a temperature check on the skills landscape. Over two thirds (70%) of Scottish organisations are experiencing the knock-on effect of ongoing skills shortages and recruitment challenges. It also highlights the effect the skills shortage is having on staff morale and wellbeing, with 84% of Scottish organisations saying the impact increases workload on other staff. To address the problem, around two thirds (62%) of surveyed organisations in Scotland have implemented some form of written plan around recruitment and training. As a result, more than half (53%) of organisations surveyed expect to increase their investment in staff training over the next year, showing that Scottish organisations are currently motivated to tackle recruitment challenges. Organisations also reported they were feeling the full impact of complex socio-economic issues such as Covid-19, Brexit, the war in Ukraine and rising business costs, were all feeding into the skills shortage. Partnering with the British Chambers of Commerce for the first time, The Open University’s 2022 Business Barometer report, was conducted by the British Chambers of Commerce, surveying of 1,300 employers. The report is an annual temperature check on the UK’s business landscape across a multitude of different UK nations, regions and sectors.