Press & Policy

Budget warnings are hitting business confidence

Dr Liz Cameron CBE, Chief Executive of Scottish Chambers of Commerce

*Originally published in the Daily Mail on the 15th of October 2024.

The drip feed of gloomy warnings over tax rises in Labour’s Autumn Budget is already having an impact on Scottish businesses.

The first 100 days of government have now passed and there has been a worrying lack of action supporting business and addressing these issues to match the pre-election rhetoric.

Whilst warnings of tough decisions to come may have been part of an effort to manage public expectations, a record number of firms are now flagging fears over taxation as their biggest concern.

Of the hundreds of businesses surveyed by the Scottish Chambers of Commerce, more than half are worried about taxation changes – up from a third last quarter, with tourism and retail sectors reaching five-year survey highs of 77% and 70% respectively.

That has a direct impact on investment and recruitment at a time when we desperately need to ease the cost pressures on businesses and invest in economic growth.

The survey, carried out in partnership with the Fraser of Allander Institute, also shows that cashflow and profit margins are suffering, with four out of five business sectors reporting a fall in profits.

Cashflow also remains a considerable challenge with three out of five sectors recording a contraction with services and tourism being the only exceptions.

We will be looking for help in December’s Scottish budget to address business rates which remains a major pressure on almost two thirds of retail firms surveyed. Leisure, hospitality and tourisms firms simply cannot endure any further tax burdens.

Escalating energy costs remain significant for just over half of firms and it remains difficult to make investment decisions when there is confusion and ambiguity about the direction of energy taxation. Concerningly, next quarter will see many businesses come out of longer-term energy deals and having to deal with hefty increases, with some gas bills alone set to rise 50%.

We can’t move forward until we know what the tax burdens and energy costs will be and how any changes will impact the business community.

For our 12,500 members across Scotland, it adds to a growing lack of confidence, when what is needed is clarity, a better understanding of our needs and positive solutions to allow us to invest and plan for the future.

We understand the fiscal pressures the Chancellor is facing and accept the need to address public finances but any changes must not be at the expense of economic growth.

We are also having to contend with major recruitment issues, particularly skills shortages, which were highlighted by half of businesses. The SCC has long urged the Chancellor to help ease that pressure by unlocking targeted investment in training with skills aligned to business demand as well as a clearer international workforce strategy to help fill key skills gaps.

Quite simply, without delivering the workforce of the future our economy will stagnate as our worldwide competitors gain an advantage.

Compounding matters, the proposals of the new Employment Rights Bill betray a fundamental misunderstanding of how employment works. The idea of allowing tribunal access from day one ignores the possibility that an employee or company may not be the right fit.

These changes will inevitably lead to more settlement agreements to speed the process and avoid lengthy tribunals – all placing another heavy burden on businesses.

The business community has taken up many offers of engagement with the new UK Government offering solutions to boost investment and grow the economy. The Autumn Budget will be the test to demonstrate whether they are listening to business and implementing policies that will kickstart the economy and enable businesses to create jobs and stimulate growth.

ENDS  ​