Economic growth forecast but businesses wary of long-term threat, report warns

The Scottish economy will continue to grow this year but there are warnings about the potential challenges ahead, a new report has indicated.

The latest quarterly economic indicator from the Scottish Chambers of Commerce shows most businesses have a positive outlook for the coming months.

The report, released in collaboration with the University of Strathclyde's Fraser of Allander Institute, covers performance in key sectors including construction, financial and business services, manufacturing, retail and tourism during the second quarter of the year.

Construction and manufacturing firms reported strong results during the three-month period, with the latter experiencing an increase in staffing levels.

Tourism businesses also reported an increase in employment, with visitor numbers up over the quarter.

Firms in finance and business services reported a further improvement in sales, with the net balance of firms reporting sales growth the highest it has been in two years.

However almost half of retail companies saw a decline in profit levels over the quarter, with increased pressure to raise prices.

More than half expect to increase prices over the next three months.

Neil Amner, chair of the Scottish Chambers of Commerce economic advisory group, said the data indicates the Scottish economy will continue to grow this year.

But he added: “Businesses are, however, also highlighting longer term threats to success from factors such as falling real incomes and rising recruitment problems.

“The retail sector is perhaps most exposed to pressures on household budgets.

“Consumer demand drives around three-quarters of Scotland's economic growth, so unless the recent falls in real earnings are reversed, there is a risk that the impact could spread to the wider economy.

“There is also evidence that the low unemployment rate may be impacting on businesses' ability to recruit the talent they need.

“Those recruitment pressures underline the need for early agreement on the rights of existing EU workers to live and work in the UK and for the UK's future migration policy to be driven by business need.

“Although the survey results are positive overall, they are not wildly so.'