Parts of the Scottish economy are bouncing back quicker than expected – but many businesses are still suffering pandemic and Brexit-induced export woes.
These are among the findings of the latest Scottish Chambers of Commerce (SCC) Quarterly Economic Indicator Survey.
Reporting “positive growth” in all sectors covered by the survey today (July 6), SCC says Scottish firms are seeing the first shoots of recovery in more than a year as Covid-19 constraints ease.
Route to economic recovery ‘a marathon, not a sprint’
But caution is still the watchword, SCC president Tim Allen warns, adding: “The success of the vaccine rollout has enabled the easing of restrictions and the gradual reopening of the economy, unleashing pent-up demand.
“This has allowed some sectors to rebound more quickly than others, however, the route to economic recovery will be a marathon, not a sprint.
“Concerns remain around the ongoing impact of Covid-19 as businesses grapple with huge uncertainties over what the economy will look like post-pandemic.”
Highlighting “faltering” export sales as one of the challenges facing the economy, SCC says Covid-19 disruption and Brexit fallout are causing trading difficulties in the service, manufacturing and retail sectors.
Inflationary pressures and a flat labour market are among other headwinds for growth, while many firms remain cautious around investment and staff levels, with most expecting no change to these anytime soon, the report says.
City and town centres also face new challenges as many people continue to work from home and more flexibly, impacting on footfall and changes to consumer behaviour, it adds.
Ailing travel sector ‘needs continued financial support’
Mr Allan says: “The needs of employers and employees alike need to be finely balanced as we shape the recovery of our city centres.
“Equally, sectors such as tourism and international travel, which continue to operate with severe restrictions, are having to adjust to increased domestic demand, a simultaneous fall in international travel and a tightening supply of skilled labour.
“The sector needs continued financial support and greater clarity on when confusing and burdensome travel regulations will end, allowing greater numbers of international visitors to return.”
Both governments must create the right environment for businesses to get back on their feet, create jobs and trade successfully again.”
He adds: “As we approach the end of restrictions businesses are increasingly turning their attention towards how to achieve long-term growth and renew Scotland’s economy.
“We have recorded the first shoots of growth… and it is essential now that
both the Scottish and UK Governments do all that they can to stimulate demand and boost confidence in the coming months.
“Priority must be given to continuing the provision of targeted financial support where it is needed most and, looking ahead, both governments must create the right environment for businesses to get back on their feet, create jobs and trade successfully again.”
Apart from exports, all sales trends have returned to positive net balances, with domestic and total sales seeing the most significant rises compared to the previous quarter, the report says.
Concerns remain around the ongoing impact of Covid-19 as businesses grapple with huge uncertainties over what the economy will look like post-pandemic.”
Tim Allan, president, Scottish Chambers of Commerce
Commenting on SCC’s second-quarter survey findings, Mairi Spowage, director at economic think-tank the Fraser of Allander Institute, said: “In April, we saw growth in the Scottish economy of 2%.
“This takes us above the previous post-pandemic peak in October, however, the economy still remains 3.7% below the pre-pandemic peak.
“Despite the optimism in the economy, there are risks to recovery which could provide
headwinds to growth – dislocation in global trade was significant due to the pandemic.
“However, we also know that the end of the EU (Brexit) transition period has caused significant issues for manufacturers and others trying to rebuild these supply chains since the start of this year.
“This chimes with today’s survey results, which show significant negative impacts
“As well-meaning as initiatives like a new Council for Economic Transformation may be, practical policy measures to help these businesses survive through the winter are likely to be needed.”