Skills shortages and availability of talent continue to act as a major barrier for business expansion in Scotland, according to latest Scottish Chambers of Commerce Quarterly Economic Indicator (QEI) report.
Scottish Chambers of Commerce president Stephen Leckie said the Scottish Government’s £2.4 billion investment into colleges, universities and the wider skills system must “remain agile to align with future economic demand to ensure we have a talent pool ready to contribute to the economy.”
The research was conducted from November 6 to December 4, with 420 firms responding to the Q4 2023 edition of the survey.
About 95% of respondents were SMEs with less than 250 employees.
The report said concern over inflation has fallen to 52% – compared to 75% in the last quarter.
It said that while on balance, more firms continue to report increases in investment than falls, “over half of firms continue to report no changes to both total (55%) and training (54%) investment.”
The survey said recruitment difficulties remain challenging, impacting 40% of firms, with associated labour costs still affecting seven in 10 firms.
Scottish Chambers of Commerce president Stephen Leckie said: “These latest survey results paint a clear picture: Scotland’s economy is stuck in a low growth cycle.
“Persistently high inflation, higher borrowing costs, frozen investment and ongoing global uncertainty are placing businesses under significant pressure.
“These issues must be addressed by all parties at the next General Election with businesses expecting clear plans which will boost economic growth and investment.
“Parties of all colours will be tested on whether they are listening to business and taking real action to back business growth.”
On the labour market, Leckie said: “Skills shortages and availability of talent continue to act as a major barrier for business expansion.
“The Scottish Government’s £2.4 billion investment into colleges, universities and the wider skills system must remain agile to align with future economic demand to ensure we have a talent pool ready to contribute to the economy.
“Businesses are rightly asking why practical existing schemes such as the Flexible Workforce Development Fund have been scrapped, considering the challenges firms face regarding training and upskilling talent.
“The news of a reduction in funded University places is also a major concern for the business community when we need as many highly skilled graduates to enter the workforce as possible.
“On top of these concerns, companies are now grappling with the increasing tax burden of working in Scotland, making it more challenging to retain and attract talent.
“The introduction of a new income tax band is impacting on our competitiveness and depleting the spending power of individuals in the economy.
“Anyone in Scotland who makes more than £28,850 will now pay higher taxes than workers elsewhere in the UK.
“Looking further afield, a coherent policy approach from the UK Government is urgently needed to attract and secure international talent.
“Recent announcements have caused confusion and impacts on our global reputation, which risks deterring skilled workers from choosing to live and work in Scotland.”
João Sousa, Deputy Director of the Fraser of Allander Institute, said: “The final quarter of 2023 was full of policy events and economic news at both UK and Scottish level setting out the context for the year ahead.
“Scotland might not be in a technical recession, but growth has remained subdued, in a stop-start pattern since the beginning of 2022.
“The latest figures show the Scottish economy just above pre-pandemic levels in October, following a monthly contraction of 0.5%.
“Prospects for 2024 are a little more positive than what transpired in 2023. This is reflected in the survey results being published today.
“Confidence has proved resilient; sales growth has continued and some of the cost pressures are starting to ease.
“These factors give us some confidence that there might be an uptick into more sustained economic growth in the year ahead.”