“Currency weakness causes of worry for many businesses in Scotland” – Liz Cameron in the Courier
If you are fortunate enough to be setting off on your summer holidays, you may get a shock at the currency exchange counter. Holiday makers across the UK are counting the cost of sterling weakness, with reports of some airport travel bureaux de change offering as little as EUR0.80 to the pound.
Of course, the easy answer is – find less expensive options than changing your money at the airport.
The fall in the value of the pound relative to other currencies was one of the major challenges for Scottish businesses in the second quarter of the year. The Scottish Chambers of Commerce’s recent Quarterly Economic Indicator (QEI) found rising costs driven by currency weakness was one of the main causes of worry for many businesses in Scotland – particularly manufacturers and construction firms.
Currency weakness can be directly attributed to the turmoil caused by Brexit uncertainty and manufacturers have been on a Brexit rollercoaster in recent months. Many were forced to stockpile ahead of the first Brexit deadline, which caused stagnation in Q2 when the risk of a no deal crash out was kicked into the long grass.
Other rising costs for manufacturers, as well as tourism and hospitality sector firms, were also linked to fears caused by the uncertainty over our departure from the European Union. Wages have been rising as European citizens increasingly stay away in their droves. Of course, most welcome a rise in their pay packet but it still amounts to a cost shock to many employers. Ideally, wage rises should also deliver an increase in skills which is something we need to focus on in Scotland.
The Office of National Statistics’ latest UK GDP and trade announcement earlier this month confirmed many aspects of our report, highlighting that despite the nightmares caused by Brexit, businesses are proving resilient. There was a modest rally in GDP growth between April and May, reflecting a slight sigh of relief when the Brexit deadline was delayed. There was also evidence of a decline in imports and a rise in export goods – the narrowing in the UK’s trade deficit perhaps one of the few silver linings of a weak pound.
We welcomed confirmation of the new UK PM but urged Mr Johnson to do his utmost to avoid a messy Brexit process. All reports consistently show the economy is on a knife edge and our political leaders need to get a grip – of themselves and the Brexit process – to ensure that businesses can get on with the job of delivering jobs and prosperity. A messy departure from the European Union would most likely trigger a marked deterioration in economic conditions. It is past time that politicians focused on boosting growth in both the UK and Scotland by delivering the transformative projects needed to secure our economic future.
