Economic recovery 'kickstarted by lifting of Covid restrictions'

Scotland’s economic recovery has been kickstarted by the end of Covid-19 restrictions in August, a new report has found.

The Scottish Chambers of Commerce (SCC) quarterly economic indicator report found an increase in confidence across all sectors in the third quarter of this year.

But uncertainty continues across businesses, with worries over the energy crisis potentially pushing prices up for firms, as well as tax and inflation worries.

Tim Allan, president of the SCC, said: “The survey results indicate that confidence and domestic sales are generally strong across all sectors surveyed, with expectations in line with improving economic forecasts that the Scottish economy should return to pre-pandemic levels in the spring of 2022.

“After what has been an extremely challenging past 18 months for Scottish businesses, many are now looking and working towards building back to a new normality.

“However, that progress is under significant threat with increasing concern over the emerging energy crisis driving up business costs, inflation and taxation, the cost of raw materials and shipping, all of which are fuelling uncertainty at a time when businesses urgently need confidence and certainty to continue their recovery from the pandemic.”

Businesses are also worried about labour shortages, with all sectors reporting difficulties in recruiting staff during the third quarter.

“All sectors in the survey are reporting increased recruitment difficulties, in line with official statistics recently reporting record high vacancies for the Scottish and UK economy,” Mr Allan said.

“If Scottish businesses cannot get the talent that they need, they risk falling dangerously behind the curve on recovery and growth.”

He added: “There is no time for timidity when it comes to action to support businesses and that’s why the Scottish and UK Government must urgently back business with a clear economic plan and budgets focused on business recovery.

“It is business which is driving the rapid return to economic growth and Governments must stop adding upfront business costs and instead focus on supercharging recovery by creating the right environment for businesses to trade, invest and grow.”

Mairi Spowage, director of the Fraser of Allander Institute – in partnership with whom the report was compiled – said the research signalled “an important boost in optimism across the Scottish economy”, but added that the end of furlough and the Universal Credit £20-a-week uplift may have a negative impact.

“Despite this positivity, there are still a number of risks to the fragile economic recovery that we have seen to date,” she said.

“It is unknown how many of the workers who were on furlough at the end of September will become unemployed or unable to secure the type and level of work they want.

“This uncertainty coincides with the cancellation of the Universal Credit uplift which will bring additional financial hardship to around half-a-million families in Scotland.

“As well as the risk of joblessness, labour shortages are becoming clear in many sectors, threatening goods shortages and adding to wider inflationary risks.”