Press & Policy

*This article first appeared in the Scottish Daily Mail on 7 April.

Traffic permitting, it takes just 15 minutes to drive from Eyemouth to Berwick-upon-Tweed.

But on that journey, which crosses the border from Scotland to England, you will move from one of the highest cost environments in the UK to one which is far more competitive.

That short trip underscores the greatest economic challenge facing our nation today.

Across Scotland, businesses are in the grip of a relentless squeeze. Costs are rising, margins are tightening, and confidence remains low.

In that environment, it is no surprise that businesses are holding back on investment or, in some cases, contemplating relocation across the border.

This worrying trend is borne out in the data. Our latest Quarterly Economic Indicator shows demand remains weak and revenues under pressure. Investment remains stuck, with four in five firms holding back or reducing spend.

The tax burden is combining with rising labour and energy costs to force businesses to scale back rather than grow.

Speak to any entrepreneur and the story is all-too-familiar. With costs up across the board, firms have no option but to pass this pressure onto increasingly cautious customers.

Indeed, almost three-quarters of businesses expect to raise prices in the coming months, a sign of just how entrenched this problem has become.

Scotland is becoming the higher-cost option within the UK, and businesses are responding accordingly. From non-domestic rates to wider divergence in tax, the gap is no longer insignificant.

Measures to mitigate the impact, such as the Small Business Bonus Scheme, have provided some relief for firms.

However, for those operating on tight margins, a tipping point is always just around the corner.

This kind of environment is not sustainable for Scotland’s economy.

That is why we are setting out a different approach. Backing Scotland’s Businesses: A Plan for Growth is a credible vision for our economic future, focused on a core priority: creating a competitive economy that attracts investment to Scotland.

Compared to the last Scottish Parliament election in 2021, we are now competing in a far more fragmented global economy.

The post-pandemic bounce faded quickly, and by 2022 the conversation had already shifted from how businesses grow, to how they survive.

Since then, firms have been tested relentlessly. Soaring energy bills – among the highest in Europe – place a ceiling on our ability to scale up key industries, like aerospace and advanced manufacturing.

Policy determined at Westminster has often only compounded the challenges we have faced, including increases to employer National Insurance contributions, which have made hiring new talent a costly expense, dampening opportunity in the labour market.

Then there is the Energy Profits Levy, which is stifling investment in the North Sea at a time when energy security is essential.

Through these headwinds, resilient firms respond in innovative ways, but they cannot continue firefighting forever. Long-term growth depends on strategic planning, not lurching from one crisis to the next.

Despite the pressures, Scotland’s attributes ensure the nation continues to attract more foreign direct investment than anywhere in the UK outside London. Proof of this can be found in multiple recent commitments, from Ryanair’s new hangar at Prestwick, to the Center Parcs resort in the Borders.

But just imagine how many more of these investments could be made if the next Scottish Government restored a competitive tax system, reformed business rates, and delivered multi-year fiscal planning, allowing businesses to plan further ahead.

Businesses are not asking for money to be thrown at their problems – they just need smarter decisions.

Too many Scottish businesses feel like they are trying to compete with one arm tied behind their back. The priority now must be to remove those barriers and restore a level playing field.

The next Scottish Government has a choice to make between continuing with an approach that pushes costs up and investment out, or take the steps needed to make Scotland competitive again.

If action is taken, Scotland can revitalise its economy. Investors and job creators from New York, Tokyo and Delhi will bring more of their chequebooks to Scotland.

With the right steps, Scotland can signal confidence, competitiveness and ambition, making it clear that this is a country to grow.

And for those closer to home, the best opportunities will be right here in Scotland.

–Charandeep Singh BEM, Chief Executive of Scottish Chambers of Commerce