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The Herald Scotland
31-07-2025
- Business
- The Herald Scotland
Scottish businesses flag ongoing effect of major blow
The research institute observed that 'many' were 'adapting to this through a combination of strategies: cutting back on hiring or cancelling increases in their workforce, adding the extra costs on to prices, and reducing employee benefits and compensation packages'. And Fraser of Allander's survey of more than 300 businesses for the second quarter found nearly 40% expect to make more adjustments down the road in response to the rise in employers' national insurance. However, the research institute noted that 'Scottish businesses are showing tentative signs of recovery, despite tremendous uncertainty in business confidence and economic outlook for the remainder of 2025'. It said: 'Despite business sentiment becoming more pessimistic for the remainder of 2025, the outlook for growth in the Scottish economy over the next year is slowly becoming more optimistic. A total of 73.5% of businesses expect weak or very weak growth compared to last year. However, this is down from 79.3% in the previous quarter, suggesting possible green shoots on the horizon.' Fraser of Allander added: 'Three per cent of businesses expect strong or very strong growth compared to the previous 12 months. This is an increase of 2.2 points from last quarter.' Read more And it observed that 23.5% of businesses now expect moderate growth, up 3.6 points from the first-quarter survey. Fraser of Allander declared the Scottish business community has 'had to deal with a plethora of challenges since the pandemic'. It added: 'While overall business confidence at the end of the second quarter of 2025 remained subdued, there were tentative signs of recovery from the sharp declines observed in Q1 2025. Changes to employer national insurance contributions, announced in the autumn 2024 UK Government Budget, kicked in at the beginning of Q2 and have significantly impacted business planning. 'Nearly two-thirds of businesses reported having adjusted their operations, whilst almost two-fifths anticipated requiring additional adjustments in response to the changes that have resulted in higher employee costs for businesses. Such policy changes, combined with ongoing inflationary pressures, continue to contribute to an overall challenging cost environment for Scottish businesses.' The latest Scottish business monitor found 'cost pressures…remain elevated'. Of businesses surveyed, 83% reported experiencing or expecting higher total business costs over the past three months and in the upcoming six months respectively. Read more Total employee costs, including wages, pensions, and national insurance contributions, remain the most pressing cost component for businesses, Fraser of Allander observed. The research institute added: 'Like last quarter, almost all businesses surveyed highlighted the influence of economic and political uncertainty over traditional economic factors, such as staff or credit availability.' A steeper decline in export activity in the second quarter is signalled by the business monitor. The rate of decline of volume and value of business activity or sales eased in the second quarter, the monitor shows. Employment also fell at a slower pace, as did the volume of new business activity. Sanjam Suri, knowledge exchange fellow at Fraser of Allander, said: 'The results in the second quarter marked a recovery of sorts after a very difficult first quarter. However, it's clear that overall business confidence remains challenged. The tentative signs of recovery have thus far failed to make a dent in the economic outlook for the rest of the year. While most businesses have adjusted to changes in NICs (national insurance contributions), nearly 40% of firms plan on making more adjustments, suggesting that the full impact of these changes [is] yet to materialise." Josh Hampson, knowledge exchange assistant at Fraser of Allander, said: 'The ongoing uncertainty around trade continues to show up in the sharp decline in the export activity from what was already seen as a weak starting point in the first quarter of 2025. Economic policy and political uncertainty are uppermost in the minds of Scottish businesses, even more than traditional factors such as borrowing costs or staff availability.'
The Independent
29-01-2025
- Business
- The Independent
Onshore GDP contracted 0.5% in a month, figures show
Scotland's onshore GDP contracted by 0.5% in November, statistics show. The figures, released by the chief statistician, also estimate GDP reduced by 0.3% in the three months to November when compared to the previous quarter. The largest contribution to the fall was made by the professional, scientific and technical services sector which contracted by 3.5%, amounting to a reduction of 0.3% from the overall total. The information and communications sector made the largest positive contribution to GDP, which grew by 1.1%, amounting to 0.1% of growth. Deputy First Minister and Economy Secretary Kate Forbes said the economy grew over the whole of 2024. She said: 'While these statistics are disappointing, I am encouraged by the fact that Scotland's economy has grown over the past year and is forecast to strengthen further this year. 'The Scottish Government is focused on driving growth and investment. Our draft Budget for 2025-26 continues the process of building a green, fair and growing economy. 'This includes almost tripling capital investment in the offshore wind supply chain to £150 million in 2025/26 and providing funding for the Scottish National Investment Bank and our enterprise agencies.' Ms Forbes said the Chancellor's decision to raise employers' national insurance contributions will have a 'damaging' impact on the economy. We are deeply concerned by the potential impact of the UK Government Budget, with higher national insurance employer contributions likely to have real and damaging consequences for businesses Kate Forbes The tax rise was announced in October and will take effect in April. Ms Forbes added: 'Many factors are outside the Scottish Government's control and we are deeply concerned by the potential impact of the UK Government Budget, with higher national insurance employer contributions likely to have real and damaging consequences for businesses.' A UK Government spokesperson said: 'The Budget delivered more money than ever before for Scottish public services and the Scottish Government receives over 20% more funding per person than equivalent UK Government spending. 'It is for the Scottish Government to allocate this across its own public sector and meet the priorities of people in Scotland. 'It will also receive additional Barnett funding on top of this record £47.7 billion settlement as part of support provided in relation to changes to employer national insurance.'
