A new report has revealed more than half of north-east firms believe there’s been a change in the biggest barrier to growth.
The north-east quarterly economic survey has been released by Aberdeen and Grampian Chamber of Commerce (AGCC) in partnership with law firm Gilson Gray.
52% of Aberdeen and Aberdeenshire businesses say high taxes has become the biggest growth barrier.
The firms believe taxation has overtaken inflation as well as high energy costs.
The key findings from the report will be outlined and discussed at a AGCC breakfast briefing in Aberdeen this morning.
High tax issues for north-east businesses is no surprise, says chief executive
North-east businesses seeing their growth hampered by taxation comes as no surprise to AGCC chief executive Russell Borthwick.
He said: “Many firms in the region operate within the oil and gas industry, which continues to be strangled by the windfall tax and a headline rate of 75%.
“The extension of the tax to 2029 will leave Aberdeen with the slowest growing economy of any city in the UK, according to EY.
“On top of that, we’ve seen the introduction of a new income tax system by the Scottish Government.
“Which has opened a significant tax gap between Scotland and England, placing businesses here at a disadvantage.
“Some companies are having to add a Scottish weighting on to salaries to compensate individuals for the income tax consequences of working in Scotland.”
It’s the first time since 2021 taxation has surpassed inflation as a constraint to growth for north-east businesses.
52% of companies polled listed it as a concern, up from 40% in the last quarter.
Mr Borthwick said there has also been a “small uplift” in the number of companies looking to invest in new machinery and equipment.
He added: “It can be attributed to the expansion of full expensing, which has given the UK one the world’s best capital allowances regimes.
“However, if the chancellor was hoping that the Budget would strengthen growth across our economy, there is little to suggest that has been achieved.”
AGCC said the windfall tax being extended is partly to blame, alongside changes in personal taxation announced in December.
What are the key findings from the latest quarter?
The AGCC breakfast briefing will cover four key findings, which will include the tax rises hampering growth for north-east businesses.
It will also discuss the continued growth of international demand.
More than a third of businesses believe their international sales have grown in the past three months.
The third key finding from the report is the labour market remaining tight. 75% of companies reported difficulties in recruiting staff in the first quarter of 2024.
Finally, the briefing will cover the easing of inflationary pressures.
Fewer firms now list inflation as restricting growth, down to 38% this quarter from 56% last time around.
North-east quarterly economic survey reports drop in cash flow
Gilson Gray partner Findlay Anderson said cash flow is “fundamental” in showing the short-term health of a business.
The latest stats see 27% of businesses report a cash flow decline, compared to 18% for the previous quarter.
Mr Anderson said: “We’ve seen a significant rise in the number of businesses reporting cash flow declines in the last quarter.
“There are more reports of businesses across multiple sectors making moves to manage cash flow. With more utilising overdrafts or seeing credit terms under pressure.
“It is clear that the north-east economy remains resilient with less inflationary concerns that previously.”
Nationally, 56% of businesses say they are expecting an increase in turnover over the next year.
Conversation