Increasing pressure is mounting on Scottish businesses as the cost-of-doing-business crisis hits the bottom line, according to the latest findings from a leading Scottish business survey from the Scottish Chambers of Commerce (SCC).
Firms have reported record levels of concern over inflation and rising cost pressures as the economy restructures following the impact of the Covid-19 pandemic, creating complex challenges for Scottish businesses.
Adding to the pre-existing obstacles facing businesses, linked to persistent labour market shortages, international supply chain disruption, soaring energy prices and an increasing tax burden, Scotland’s economy is entering into a period of increased uncertainty.
Businesses are starting to feel the impact of reduced spending as consumers tighten their belts and disposable income drops, hitting many firms cashflow and profits, particularly in the tourism and retail sectors where recovery remains lethargic.
With inflation reaching a 30-year-high, the rapid return to economic growth seen following the removal of Covid-19 restrictions is now plateauing with firms being forced to make tough decisions around investment, recruitment, and price rises.
The situation in Ukraine is also deepening business concern with many continuing to seek advice, information and support to make decisions, adapt to rapidly changing circumstances and navigate the challenging times ahead with further international trade disruption likely.
- Record Concern Over Inflation: With UK inflation reaching 5.5% earlier this year, the negative impact on businesses is becoming increasingly clear with all sectors of the economy reporting record high levels of concern. The financial and business services sector (FBS) reported a 15% increase and the tourism sector a 14% increase from Q4 2021 respectively.
- Cashflow Crunch and Profits Plummet: Businesses continue to report significant cashflow and profit challenges, with high inflation a key driving factor. The construction, retail and tourism sectors all reported decreases in both cashflow and profits, highlighting the impact of rising cost pressures, leaving businesses at increased risk from economic shocks.
- Growing Cost Pressures: Across all sectors, business cost pressures have increased. Raw material prices, rising energy costs, increased tax burdens and other overheads are leading pressures. Energy price rises and the ongoing global supply chain disruption are cited to be the primary contributing factors to these increases.
- Consumer Price Rise: In response to rising cost pressures, a record 7 in 10 firms have indicated that they intend to raise the prices that they charge for their goods and services. This is likely to deepen inflationary challenges and further increase the cost-of-living.
- Retail and Tourism Remain Vulnerable: Despite the continued easing of COVID-19 restrictions over the first quarter of 2022, firms in these sectors have still reported concerning figures for both sales and investment. Retail footfall remains considerably below pre-pandemic levels due to changes in office work patterns and the removal of international travel restrictions have cooled the staycation market.
Stephen Leckie, President of the Scottish Chambers of Commerce said:
“Despite a period of relatively strong growth, the latest Scottish Chambers of Commerce business survey reveals that growth is now levelling off as the complexity of the challenges facing Scotland’s businesses start to take hold.
“Firms are becoming increasingly anxious about rising inflation, energy prices and cost pressures. For too many businesses, the focus is still simply on survival.
“Businesses who have weathered the pandemic over the past two years are now seeing problems pile up, one on top of another, as they struggle with longstanding challenges linked to recruitment, planning and managing change and are now being hammered by surging energy prices, inflation and falling consumer spending.
“Consequently, Scotland’s businesses are making serious adjustments to operating models and grappling with difficult decisions on whether to absorb price rises or pass them onto the consumer. Business finances are also being squeezed by Coronavirus Business Interruption Loan Scheme repayments, rising interest rates and significant business insurance cost rises.
“The prospect of impending additional tax burdens such as the Workplace Parking Levy, Transient Visitor Levy (Tourist Tax) and the Deposit Return Scheme are further cause for concern amongst already hard-pressed businesses.
“Economic growth is now plateauing because of these rising inflationary and cost pressures creating an increasingly uncertain outlook for businesses, with international trade and the global economy remaining volatile.
“With continued disruption to international trade due to the war in Ukraine, energy prices expected to rise again later in the year and inflation likely to remain resurgent, businesses will be forced to increase prices further, cut back on investment and protect their cashflow and profits to enable them to cope with any additional economic shocks.
“Scotland is approaching a critical point in recovery. Businesses are struggling now.
“That is why the Scottish and UK Government’s need to urgently rethink the impact of new and increased taxes on business if the economy is to be given the headroom it needs to survive this crisis and grow.”
On business support:
“Businesses are still grateful for the financial support and assistance provided by both the Scottish and UK Government’s over the course of the pandemic, however, now is not the time to pull the rug out from under the business community.
“Business support needs to be reset and realigned with the economic reality. Businesses need support now and Government intervention must protect the recovery that businesses have worked hard to secure.
“As a priority, the UK Government should seriously consider the introduction of an SME energy price cap to protect smaller firms from some of the major energy price increases, in the same way that households have been supported.
“The Chancellor missed an opportunity in the Spring Statement to deliver for businesses and the subsequent National Insurance increase has been yet another hammer blow for Scottish businesses adding millions to an already heavy tax burden.
“Without meaningful support, businesses will have little option but to raise prices, increasing pressure even further on business and household finances.”
On retail and tourism:
“Scotland’s retail and tourism sectors desperately need additional support from government as their recovery is lagging other parts of Scotland’s economy.
“Both sectors have been amongst the worst hit by the pandemic and the subsequent changes in consumer behaviours. They are also the most likely sectors to operate to tight cashflow and profit margins, and that’s why urgent support is needed now.
“Sustained business support and rethinking the removal of Covid-19 business rates and VAT relief by both Scottish and UK Governments is necessary to facilitate recovery and avoid businesses going to the wall at this critical point in Scotland’s economic recovery.”
Commenting on the results, Mairi Spowage, Director at the University of Strathclyde’s Fraser of Allander Institute, said:
“Two years on from the first lockdown, it would be great to be optimistic about the economic prospects for 2022. Unfortunately, global uncertainties and the cost-of-living crisis, which are not unrelated to each other, have doused that enthusiasm with a bucket of cold water.
“Despite the impact of Omicron in December, the economy is now (as of data in January) back above pre-pandemic levels of growth. This milestone in the recovery is of course important: but seems less heartening than it might have done a few months ago given the wider economic conditions.
“Current data suggests that the experience of input price rises for businesses is running at more than double the consumer inflation rate. And as much as many businesses are trying to avoid passing price rises onto customers, something may have to give for tight margin businesses.
“This may mean that these cost pressures may continue to feed through to prices experienced by consumers as more businesses face difficult choices.
“In the face of all these headwinds, it can be difficult not to be gloomy about the prospects for growth in 2022. The Scottish business base has shown incredible resilience through the last couple of years, and was looking forward to a strong Spring and Summer as we look to operate without COVID-related restrictions.
“In line with this resilience, it is important to highlight that these results today show positivity for 2022 despite all these challenges. It will be interesting to see how this positivity evolves as we progress through 2022.”
A specialist, cross-sector team from the firm has advised on the sale of the Speyside and Cramlingtion biomass with CHP projects
Burges Salmon has recently advised Speyside Renewable Energy Partnership, the owner of a 15MWe biomass combined heat and power (CHP) plant near Craigellachie, Moray, on its sale to a subsidiary of Greencoat Renewable Income LP, Greencoat’s new closed-ended private markets fund.
The Speyside plant has the capacity to generate enough renewable electricity to power 20,000 homes and when the 10MWth of heat supplied to the Macallan Distillery, and the natural gas this displaces is taken into account, represents a potential carbon saving equivalent to 42,000 tonnes of CO2 per annum, equivalent to taking 18,000 cars off the road per year.
This transaction is the second large scale biomass with CHP disposal that Burges Salmon has advised on in nine months. In June 2021 Burges Salmon advised Cramlington Renewable Energy Developments Limited, the owner of the 28MWe biomass CHP plant in Cramlington, Northumberland (and the sister project to the Speyside biomass CHP project), on its sale to JLEN Environmental Assets Group Limited. Similar to the Speyside plant, the Cramlington plant has the capacity to power in excess of 50,000 homes, reducing greenhouse gas emissions by the equivalent of taking 25,000 cars off the road per year and supplies renewable electricity and heat to its neighbours at Cramlington, Aesica Pharmaceuticals and Merck Sharpe & Dohme.
The Burges Salmon team advising on the deal was led by director Amy McVey and head of Corporate Restructuring and Insolvency, Andrew Eaton, with support from Edinburgh-based partner Danny Lee (Corporate), Richard Adams (partner, Construction and Engineering), Fay Shearer and Thomas Mark Bell (senior associates, Real Estate), Paul Clark (consultant, Real Associate), Euan Bremner (Partner, Real Estate) and Isobel Annan (Solicitor), Alec Whiter (Director) and Nick Churchward (Partner) (all from the Energy Projects team).
Andrew Dixon, independent director at SREP and CRED at the time of their sales, comments: “We are very grateful to the Burges Salmon team for providing us with comprehensive specialist advice and helping us navigate a series of complex transactions and seamlessly bring them to a successful and timely conclusion.”
Christmas came early to The Balmoral Hotel in Edinburgh as 230 local ladies enjoyed a ‘Winter Wonderland’ lunch, raising £37,000 for Children’s Hospices Across Scotland (CHAS) in the process.
The glittering event, which had to be postponed in December because of Covid restrictions, was hosted by popular Scottish presenter and comedian, Des Clarke and featured a variety of party games, a raffle, a champagne draw and a diamond draw.
There was also a silent auction and a live auction, compered by former Scotland rugby player, Andy Nicol. Entertainment on the day was provided by MGA Academy and popular Edinburgh-based band, BLEEKER.
Special guests of honour were CHAS parents, Andrew Couper and Gemma Munro from Kirkcaldy, Fife, who took to the stage to share how CHAS supported their family after the death of her baby daughter, Georgia in 2021.
CHAS High Profile Events Manager Diane Alton said: “Our annual Winter Wonderland event is always a hugely popular event in the CHAS calendar so we were glad to finally welcome all our amazing supporters back and to bring a touch of Christmas to Edinburgh this Spring-time.”
“We are delighted to have raised £68,035 (£36,903.85 after costs) which will go a long way towards helping the children with life-shortening conditions and their families CHAS supports across Scotland.
“I would like to say a huge thanks to our amazing host, Des Clarke, the MGA Academy, BLEEKER, Andy Nicol and, of course, our parent speakers, Gemma Munro and Andrew Couper for sharing their incredibly touching story about baby Georgia. Thanks must also go to all our guests, sponsors, committee, organisers and volunteers who truly made it the most wonderful time of the year!”
Workplace design and management consultancy, Space Solutions, has appointed Tracey Bell as Senior Facilities Manager, to boost its expert FM division.
Tracey’s appointment expands the Facilities Management team to over 30 and builds on skills in supporting client operations from procurement and contract management to service delivery, performance monitoring and strategic reviews.
Tracey has a proven track record in delivering Facilities and Property Management services across both public and private sectors and has a background in architecture and engineering. Her former roles include Head of Estates & Facilities at Mental Health Concern Insight; National Account Manager, North for Salisbury Group; and Estates & Property Manager for TEP Ltd. Tracey joins an expert team which includes contract management and logistics specialist, Miguel Montenegro and which is headed by Director of Facilities Management, Stuart Craig.
Stuart Craig commented: “Our FM team is highly regarded and brings considerable expertise in contract management, procurement and operational performance that can transform our client’s business.
“The team works with clients across the public and private sector, and we are proud to have added NEC4 TSC accreditation to our skillset through Miguel Montenegro. This allows us to work across NEC contracts on procurement, negotiations, implementation and contract management.“
Tracey Bell said: “I’m so thrilled to have joined Space Solutions to work alongside such experienced and skilled individuals. I’m really looking forward to sharing my enthusiasm and passion with everyone in FM, using my wealth of knowledge and skills to set the standard, grow sustainably and extend our range of services.”
The Space FM Consultancy Service offers specialist support, using bespoke software packages, with the procurement and adoption processes of NEC contracts and includes fully trained and qualified practitioners in the implementation and use of NEC3 & 4 Contracts (TSC, TSSC, and FM).
The British Chambers of Commerce (BCC) is urging the Chancellor to take bold and decisive action in his Spring Statement to tackle the escalating cost of doing business crisis.
As global and domestic headwinds mount following the invasion of Ukraine, the BCC believes he must act now to protect the UK from a renewed economic crisis.
The call comes as businesses are increasingly reporting a crippling burden from a myriad of cost pressures, including rising raw material costs, soaring energy bills and other overheads:
Simon Boyd, managing director of Reidsteel, which manufactures and builds steel framed buildings, said: “We have seen huge shifts in the commodities market with raw materials like nickel going from $10,000 a tonne to briefly hitting $86,000. That might be just a spike, but the reality is steel making has become much more expensive due to the situation in Ukraine, the aftereffects of Covid and ever-increasing energy prices.
“On Friday we had an extra £250 a tonne added to our prices for steel sections and plate. We cannot stand an increase in National Insurance or any further increase in any other taxes whatsoever, they need to be looking at reducing the tax burden.”
Chris Black, managing director of jukebox manufacturer, SoundLeisure, said: “Like every business we are facing increased costs in raw materials, production and energy costs, mainland deliveries and international shipping. In 36 years, I have not personally witnessed anything like this, across the globe, all at the same time. Some of the costs of raw materials are not just impacting the price of goods, they are also impacting lead times. Nickel prices quadrupled last week, and copper doubled! This is just a small proportion of what we are facing on a daily basis and the cost to the business in man hours and production delays is immense.”
The ongoing energy crisis is also having a significant impact on consumers and businesses who are facing a sustained period of soaring prices. Businesses have been hit by steep rises in their energy bills, with further increases likely as existing fixed tariff contracts come to an end in the coming months:
Lee Strickland, who runs the Cohort St Ives hostel, said: “Energy prices are a massive issue, they’ve gone up by 250%. This is not sustainable. On top of which we are being squeezed by huge increases in supplier costs. We are still recovering from Covid and this is a huge setback to that recovery.”
Julia Fairchild, Director at Restorative Techniques, a manufacturer of masonry cleaning machines, said: “We use a lot of electricity in this business and have sought to make savings where possible, however [we’re] now expecting a massive rise in cost and less choice of energy suppliers available.”
The BCC’s latest economic forecast projects that the war in Ukraine has increased the risk of a recession in the UK by exacerbating the already acute inflationary squeeze on consumers and businesses and derailing the supply of commodities to key sectors of the economy. Raising taxes at this time would weaken the UK’s growth prospects further, by undermining confidence and diminishing households’ and firms’ finances.
With a week to go, the BCC calls on the government to use the Spring Statement to enact the BCC’s Five Point Plan to Tackle the Cost of Doing Business Crisis:
- Delay the impending National Insurance rise by one year to give firms much-needed financial headroom to weather this unprecedented surge in costs facing businesses and power the recovery.
- Temporary energy price cap for small businesses to protect smaller firms from some of the price increases they would otherwise face, offering the same protection as households.
- Additional financial support, through the expansion of the energy bills rebate scheme for households to also include small firms and energy intensive businesses, a new support fund, administered by Ofgem to support the smallest firms with their soaring energy bills and a six-month extension to the Recovery Loan Scheme, leaving it in place until the end of 2022.
- A moratorium, for the life of this parliament, on all policy measures that increase business costs, including no new business taxes or added regulatory burdens, but excluding only evidence-based changes to the National Living Wage.
- A commitment from the government’s Supply Chain Advisory Group and Industry Taskforce to continue to work with industry to urgently deliver practical solutions to ease the supply chain disruption and labour shortages that continue to drive the upward pressure on prices.
The Five Point Plan gives firms a chance to stabilise without having to seriously increase their prices, cut jobs or cut the investment that is so vital to sustaining our economic recovery from Covid-19.
In Q4 of 2021, the BCC’s QES found two thirds of businesses did not increase investment, with only a third reporting increased cashflow. If not addressed, the surging cost pressures produced by the cost of doing business crisis will continue to lead to increased prices and fuel the cost-of-living crisis currently being faced by people across the country.
The BCC is also calling on energy firms to work more closely with government, business and other key stakeholders to provide more substantial support to help businesses and households to navigate this difficult period.
Shevaun Haviland, Director General at the BCC, said:
“The Spring Statement is taking place against a backdrop of soaring uncertainty surrounding both the UK and global economy, so a business-as-usual approach from the Chancellor simply won’t cut it.
“Business confidence is on the floor. Coming so soon after a covid-induced squeeze on cashflow and investment plans, the cumulative effect of rising raw material costs, soaring energy bills and other overheads is causing many firms to take cost reduction measures. This is weighing down on their ability to invest, recruit and grow.
“Businesses strongly oppose a rise in national insurance contributions as it will be a drag anchor on the economy, landing significant costs on firms when they are already facing a raft of other cost pressures and have built up huge debt burdens.
“The government must now fortify our economy for what will likely be some gruelling weeks and months ahead. It must prove it is serious about doing whatever it takes to support companies through these domestic and global economic shocks.
“Implementing our five-point plan would help shield firms from the worst of the costs’ crisis – giving them headroom to keep a lid on prices, protect jobs and make investment that is so vital to sustaining our economic prospects.”
• 54% of firms say the business support provided by the UK Government in response to Plan B measures is not sufficient in the short term
• 59% say Government did not adequately assess the impact of Plan B measures on businesses
• 38% of business to consumer (b2c) firms say their business suffered a loss of revenue due to Plan B – more than 1 in 5 (21%) say this was ‘significant’
• 68% of firms reported absences due to illness or self-isolation in the last month, and of those, 50% said they had to reduce output or activity as a result
New figures released today (27.1.22), as Plan B measures came to an end in England, by the British Chambers of Commerce have laid bare the impact of Plan B measures on businesses. Director General Shevaun Haviland is calling on Government to delay the forthcoming National Insurance increase to give firms more time to recover. The survey data, from over 700 firms, showed sizeable proportions felt Government had not done enough to assess the impact the measures would have on business, and that support from the Treasury had not been sufficient even in the short term.
The responses to a question asking firms to what extent they agreed or disagreed with the following statements as they related to the Plan B measures were as follows:
Statement Strongly Agree Somewhat Agree Somewhat Disagree Strongly Disagree Need more Information
The Government adequately assessed the impact on businesses (n=747) 7% 27% 24% 35% 7%
The support available for business is sufficient in the short term (n=744) 8% 29% 23% 31% 9%
On the statement ‘My business saw a significant loss of revenue following the announcement’ the results were highly variable by sector, with consumer-facing firms such as those in hospitality and retail far more likely to be reporting losses than business-facing firms such as those in professional services.
When asked if they had experienced absences in the past month only 32% of firms reported no absences.
Manufacturers were the most likely to report absences at 81%, followed by B2C services at 67% and B2B services at 57%.
Responding to the figures, Director General of the British Chambers of Commerce, Shevaun Haviland, said:
“These figures lay bare the serious impact that Omicron and the Plan B restrictions have had on our economy. Whilst the financial support offered by the Treasury was welcome it is clear than many firms still found it was not entirely sufficient. Many also told us that they felt the impact of the measures should have been more thoroughly assessed.
“Significant numbers of firms in the business to consumer sector also reported a large loss of revenue following the announcement, whilst output from manufacturers was hit especially hard by absences from illness.
“We now need to see plans for dealing with any future variants made public, along with assessments of the impact of any measures required and what support would accompany those measures. We all hope this is the beginning of the end of the pandemic, however the role of Government is to plan for all eventualities.
“Businesses will only truly be able to enter a phase of ‘living with Covid’ when they have the confidence that a plan is in place should further complications arise. We are seriously concerned about the impact on business investment in the absence of a comprehensive plan for the future.
“Government also needs to recognise that the events of December piled further pressure on businesses who were already drowning in increased costs. These firms need to be given a chance to come up for air if we are to engineer a successful recovery in every sector and every region of the country.
“That’s why I am calling on the Government to postpone the rise in National Insurance Contributions due for April to give the economy a chance to properly recover. They should commit to levy no further up-front costs on businesses for the remainder of this parliament to give businesses the confidence they need to invest and grow for the future.”
Edinburgh Chamber of Commerce today called on the UK Government to help ease a recruitment crisis which provides a major obstacle to the economic recovery – including issuing temporary visas to foreign workers in the most impacted sectors.
The problem has been caused by a lack of overseas staff following Brexit, along with the continued impact on staffing of the Covid 19 pandemic.
While more training and investment for home-grown talent remains a priority both for the Government and businesses, this will not solve the immediate problems facing companies unable to meet demands because they lack people with the skills they need to thrive.
According to the latest figures released by the British Chambers of Commerce, in some sectors – notably hospitality which supports tens of thousands of jobs in Edinburgh – 83% of companies are facing difficulty in filling vacancies.
Liz McAreavey, Chief Executive of Edinburgh Chamber, said: “The record level of firms struggling to fill job vacancies last quarter will have impacted on their ability to meet demand for goods and services – adding to existing supply chain pressures.
“And as the Omicron variant continues to cause staff absences, many firms could see any progress they have made slip back.
“More business investment in home grown talent – and creating a more inclusive and diverse workforce – is key to solving pervasive skills shortages, but this won’t happen overnight. Burdened with high levels of debt, escalating wage and input costs, damaged cashflow and an uncertain economic environment, employers need help to get back on their feet.
“The government must do all it can to ensure people can access rapid retraining opportunities for in-demand jobs, issue temporary visas for lower skilled jobs – where there is clear evidence of a national shortage – and ensure there are no further upfront costs on business for the remainder of this parliament.”
New figures released today by the British Chambers of Commerce saw the proportion of firms struggling to recruit staff reach new record levels. The data for the leading business group’s Quarterly Recruitment Outlook survey for Q4 2021 was drawn from a survey of over 5,400 businesses.
Key points include:
- 4 out of 5 (79%) firms that attempted to recruit facing difficulties in finding staff
- Hospitality and construction firms most likely to report difficulties (each 83%) but all sectors have significant issues
- Firms cite major issues arising from lack of foreign nationals to recruit as well as disruption due to Covid
Attempted recruitment in Q4 was up on previous quarters with 64% overall attempting to recruit staff (61% in Q3). However, the proportion of firms reporting difficulties filling roles reached a historical high at 79%, up from 77% in the previous quarter.
The UK economy will grow at a slower pace than expected with trade set to lag significantly behind the wider recovery, according to the British Chambers of Commerce’s (BCC) latest economic forecast.
UK Economic Outlook – 2021
The leading business group has downgraded its expectations for UK GDP growth in 2021 from 7.1% to 6.8%. The downgrade reflects the expectation that the UK’s economic recovery will stall in the final quarter of 2021.
However, GDP growth of 6.8% would still be the strongest outturn since official records began in 1949.1 following the historic contraction of 9.7% in 2020.
Following GDP growth of 1.3% in Q3, UK GDP growth is forecast to slow to 0.5% in Q4 2021, as staff shortages, supply chain disruption and rising inflation stifle activity. Concern over the Omicron variant is also expected to weigh on Q4 growth by triggering some hesitancy among consumers to socialise and spend.
Consequently, the UK economy is only expected to return to its pre-pandemic level in Q2 2022, one quarter later than predicted in the BCC’s previous forecast.
UK Economic Outlook – 2022
GDP growth is now projected to slow down by more than expected to 4.2% in 2022, from our previous forecast of 5.2%.
The 2022 downgrade largely reflects a softer outlook for consumer spending as the squeeze on incomes from high inflation limits the gains from an increasingly robust labour market and the anticipated running down of household savings built-up during lockdowns. That said, consumer spending is still expected to be the main driver of the UK economy next year.
The downgrade also reflects the anticipated squeeze on activity from ongoing staff shortages, supply chain disruption and rising cost pressures. Manufacturing is expected to be the worst hit with output growth revised downwards by 2.1 percentage points for 2022, followed by construction (revised down by 0.9 percentage points).
Trade is forecast to make a negative contribution to UK GDP over the forecast period.
UK exports are forecast to decline by 2.8% this year and remain 14.9% (£27.7 billion) lower than their pre-pandemic level by the end of the forecast period in Q4 2023. In contrast, overall UK GDP is projected to be 3.4% higher than its pre-pandemic level by the end of the forecast period.
This reflects the challenging outlook for UK exporters amid the ongoing disruption to international trade flows from Covid and continued post-Brexit disruption to trade with the EU.
Inflation and Interest Rates
The rising cost of imported raw materials and higher energy prices, are expected to lift CPI inflation to a peak of 5.2% in Q2 2022, which if realised would be the highest rate since September 2011. However, if the current global supply chain disruption eases in the second half of 2022 as assumed in the BCC’s latest forecast, inflation is expected to drift back towards the Bank of England’s 2% target by the middle of 2023.
UK interest rates are projected to remain on hold at next week’s Monetary Policy Committee meeting with concerns over the impact of the Omicron variant on the economy likely to delay the anticipated rate hike.
Two interest rate rises are forecast over 2022 – 15 percentage points in February 2022 and 25 percentage points in November 2022. A further 25 percentage points interest rate rise is expected in 2023, thereby fully reversing the pandemic response interest rate cuts in March 2020.
The BCC forecast assumes no renewal of lockdown restrictions. The reintroduction of such measures would lead to revisions in the BCC’s next forecast.
Commenting on the forecast, Suren Thiru, Head of Economics at the British Chambers of Commerce, said:
“Our latest outlook suggests that the loss of momentum in the third quarter was more than just a temporary blip, with UK growth forecast to be more subdued for a sustained period as supply disruption, staff shortages and surging inflation limits activity.
“The downgrades to our forecast reflect a moderating outlook for key areas of the UK economy, including consumer spending and trade. Consumer spending is likely to be more restrained than expected over the near term from a combination of negative real wage growth and stretched household finances amid rising inflation.
“Trading conditions for UK exporters are expected to remain difficult over the forecast period with the lingering impact of Covid and Brexit expected to weigh on trade flows for some time to come.
“While our latest forecast suggests that interest rates will rise sooner rather than later, with the current inflationary surge largely driven by supply side constraints and global price pressures, raising rates is likely to do little to curb the current spike in consumer prices.
“The risks to the outlook remain tilted to the downside. The Omicron variant could stall the recovery if it triggers a prolonged reluctance among consumers to spend or a renewed supply shock by exacerbating current staff shortages through a new ‘pingdemic’ and driving more supply chain disruption.”
Responding to the forecast, Hannah Essex, Co-Executive Director the British Chambers of Commerce, added:
“It’s clear that the UK economy is not out of the woods yet. There remains a great deal of uncertainty for businesses as the arrival of the Omicron variant adds to the difficulties they face alongside rising costs, supply chain disruption and labour shortages.
“Since the summer, we have been calling for the Government to give firms a clear contingency plan should restrictions once again become necessary to protect public health. If firms are to weather more challenging conditions in the next few months, they need to have confidence that support will be provided to those facing a significant impact on their ability to trade, including reduced footfall.
“It is also more vital than ever that the Government’s Supply Chain Advisory Group and Industry Taskforce start to provide some practical solutions to the supply and labour shortages that are continuing to weigh down on the economic recovery.
“Our disappointing forecast for exports underscores the need to address the key pressures facing traders. The UK-EU trade agreement needs to be built upon and applied in ways which cut the current red tape, costs and burdens on businesses. Significant issues must be resolved so that exports can become a driving force in our recovery from the pandemic.
“With the planned rise in National Insurance yet to take effect businesses are facing a continuing squeeze on their cashflow. There should be no further policy measures that add to the upfront cost of doing business for the remainder of this Parliament to give firms room to recover.”
Key points in the forecast:
- UK GDP growth forecasts for 2021 and 2022 downgradedfrom 7.1% to 6.8%, and 5.2% to 4.2% respectively. UK GDP growth forecast for 2023 has been upgraded from 2.1% to 2.3%
- Following the Q3 2021 growth of 1.3%, quarter-on-quarter GDP growth forecast at 0.5% in Q4, (down from our previous forecast of 1.6%)
- Household consumption is now forecast to grow at 4.0% in 2021, 6.9% in 2022 and 2.7% in 2023, down from 5.5% in 2021, 7.6% for 2022 and 2.8% in 2023 in our previous forecast
- BCC expects UK exports to decline by 2.8% in 2021, before growth of 4.9% in 2022 and 2.7% in 2023, compared to import growth of 1.2%, 6.2% and 3.1%
- Business investment forecast is for a decline of 0.6% in 2021, before growth of 5.1% in 2022 and 2.6% in 2023
- BCC expects a UK unemployment rate of 4.5% in 2021, 4.1% in 2022 and 3.8% in 2023, compared to the previous forecast of 4.9%, 4.7% and 4.4% respectively
In terms of sectors:
- Growth in manufacturing output has been downgradedfrom 8.6% to 6.8% for 2021 and from 5.1% to 3.0% in 2022. Expected growth in 2023 has been upgraded from 2.0% to 2.5%
- Growth in construction outputhas been downgraded from 13.8% to 13.7% for 2021 and from 3.8% to 2.9% in 2022. Expected growth in 2023 is unchanged at 2.8%
- Growth in services output is forecast at 7.0% in 2021 and 2.0% in 2023, unchanged from previous forecast. Expected growth in 2022 has been downgraded from 5.6% to 4.8%
A groundbreaking initiative which allows students to study for a university degree while in paid employment today (October 27) produced its first graduates at Edinburgh Napier University.
Twenty-nine students graduated from the university’s School of Computing under the Graduate Apprenticeships scheme, with their degrees including BSc (Hons) IT Management for Business, BSc (Hons) Software Development and BEng (Hons) Cyber Security.
A graduation ceremony at the city’s Usher Hall saw the university’s first intake complete their degrees four years after the university began offering Graduate Apprenticeships, an initiative developed by Skills Development Scotland in partnership with industry and the higher education sector.
Graduate Apprenticeships drive economic growth by offering employers the chance to train and develop new and existing employees through a fully funded university degree.
The apprenticeships combine academic knowledge with skills development, and Edinburgh Napier now offers GA courses in its School of Computing, Business School and School of Engineering & the Built Environment.
Among today’s first Edinburgh Napier graduates from the scheme was Craig Potter, 38, a Detective Sergeant with Police Scotland, who graduated with a first class BEng honours degree in Cyber Security.
Craig, of Edinburgh, said: “It has been four years of hard slog in addition to my full-time work as a police officer, but I feel a real sense of achievement in completing my degree.
“It has helped me get promoted and has helped Police Scotland in terms of upskilling staff. A lot of my work-based projects and my dissertation have been around improving the force capability in relation to the investigation of Cryptocurrency, so there are tangible benefits to both employers and employees in going down this route.”
Graduate Apprenticeships are available to businesses of any size in Scotland, with apprentices typically spending 80 per cent of their time in the workplace and 20 per cent at university. They are available for people looking for a new job with a participating employer as well as those looking to upskill through their current job, and tasks and projects apprentices carry out in work can count towards their degree.
Professor Sally Smith, Head of Graduate Apprenticeships at Edinburgh Napier, said: “We’re delighted to see our first ever graduate apprentices crossing the stage this year. Graduation is a time to reflect on personal achievements and celebrate all that hard work paying off. We also acknowledge the support provided by employers, the early adopters who recognised the strengths of the Graduate Apprenticeship model. From that first day four years ago, the apprenticeships have gone from strength to strength, expanding into new subjects.”
Scott Killen, the university’s employment liaison and recruitment manager, said: “In order for a Graduate Apprentice to succeed their employer must be dedicated to supporting them in their university work, professional development and work-based learning. The employers of the class of 2021 took a big risk in enrolling their staff into a brand new degree programme in September 2017. They have been instrumental in the graduating cohort’s success. Their contribution and feedback has also helped us continually improve how we support employers and apprentices to deliver positive learning experience both in university and the workplace.”
Mira Thow, Global HR Manager with KAL, a leader in ATM software, said: “Graduate profiles are an invaluable part of the future of our business. Each year KAL ATM Software Gmbh hires a cohort of at least 12 talented, driven students from the best universities in the world. After four years of intensive training and development in our graduate program, it is truly inspiring to see our first cohort of Graduate Apprentices blossom into fully fledged engineers who we are also confident will become the next generation of business leaders.”
We are continuing engagement through the Scottish Chambers of Commerce and British Chambers of Commerce on national and UK-wide issues. Some of the issues we’ve been focusing on this quarter have included:
- The relaxation of Covid rules, and working with Scottish Government on new guidance to help businesses navigate the sometimes complex post-Covid landscape
- The proposals around Green Ports and Free Ports
- Issues around access to labour and supply chain issues, which are affecting many of our members
- Working with the UK Government to try and shape the levelling-up agenda
- In the run up to the UK hosting of COP26 in Glasgow, we have been working closely with BCC and SCC on preparations for COP, as well as more broadly on the sustainability agenda. This includes participating in British Chambers Climate Challenge group.
- We have also been feeding into preparations around the upcoming UK Budget