Concerns over tax are preying on the minds of North-east businesses, with just under a fortnight to go until the Chancellor unveils her Budget.
The results drawn from Aberdeen & Grampian Chamber of Commerce’s latest Quarterly Economic Survey show concerns over taxation have rocketed up the risk register for firms in the region – with 61% of companies in the North-east citing this as a barrier to growth, up from 48% just three months ago.
The numbers showed a marked divergence on this key indicator between North-east Scotland and the rest of the country with a thirteen percentage points variance, as the region braces for yet another tax raid on the energy sector.
QES is the UK’s largest and longest running independent survey on business sentiment, completed by companies in the Chamber of Commerce network across our nations and regions with a total sample size of over 5,000 firms – with a sizeable subsample presented today from Aberdeen & Grampian allowing for robust comparison of regional and national data. This was the first opportunity for companies to provide their views since the new government came to power in July.
The quarterly series is supported and sponsored by Gilson Gray, a multi-award winning full-service law firm with offices in Aberdeen, Edinburgh, London and across the UK.
Alongside tax concerns, this latest dataset covering mid-August to September 2024, shows the region’s economy in something of a “holding pattern” according to AGCC Chief Executive Russell Borthwick, “with companies sitting on their hands, waiting to see what new government business and taxation policy will mean for them”.
In this latest dataset, around half of North-east businesses noted that domestic sales were flat for the quarter with only 28% reporting growth for the period – the lowest figures for three years – against a backdrop of a rosier picture across the UK more widely.
The availability of skills and labour continues to present challenges with 79% of companies in the region reporting difficulties in recruiting suitable staff, a 9 point increase from last quarter.
This and the headwinds facing businesses here means that just 24% of those surveyed expect the size of their workforce to increase this year, down 12 percentage points on three months ago and the lowest numbers recorded since Q1 2021.
Price inflation remains marginally higher here than across the UK with labour and utility costs still the main factors influencing this. However trends show that these pressures have been easing over the last year.
Commenting on the publication of these figures, Aberdeen & Grampian Chamber of Commerce Chief Executive Russell Borthwick said:
“Although less than a fifth of responses to the survey were from companies in the energy sector, it’s apparent that the huge uncertainties facing the future of oil and gas operations in the North Sea are having a knock-on effect on confidence in the wider North-east economy.
“The Chamber has been very clear in its warnings to the new government about the catastrophic economic and jobs impact of its intended taxation policy towards the North Sea.
“The North-east results of the Q3 survey suggest this is a spectre that looms large.
“Future sales pipeline, turnover and profit forecasts are all increasingly pessimistic and significantly worse than the UK results.
“That said, we should recognise that since the survey closed there has been some positive news for our region with the confirmation that Great British Energy will be headquartered in Aberdeen and the announcement of a number of exciting new clean energy projects in the region.
“Furthermore, the North-east continues to outperform the rest of the country on exports, largely driven by our world class energy and food, drink, agriculture and fisheries sectors.
“Our message to governments at all levels, as they pore over these latest results, is listen to what businesses in this region are telling you, sharpen up your policy-setting and decision-making, cut regulation and create the conditions for the private sector to drive the meaningful economic growth we are crying out for.”
Findlay Anderson, Partner and Head of Corporate at Gilson Gray LLP, said: “Unfortunately this quarter we see evidence of businesses reducing their growth expectations, limiting P&E investment plans and responding to rising taxation burdens as they take stock of the pronouncements from the new UK Government and they brace for the coming Budget and the changes it may bring.
“It is almost certainly no coincidence that this period correlates to a time where Scottish and UK governments have generally ignored the pleas of many businesses, leaders and organisations in the North-east and have applied policies and tax regimes which are anything but business friendly. It is likely that some of this is a “foot on the ball” moment for businesses ahead of the impending budget announcements, as boards exercise caution. But the messaging is clear - Government must find the balance between taxing and incentivising industry if we are to avoid a wider slowdown.
“The North-east has proven itself to be resilient many times and has outperformed peers consistently. There is a lot to be proud of and significant energy, expertise and investment exists to ensure a strong future for our region and beyond. But surveys like the QES are a reminder that Government must listen to and partner with industry in order to ensure that the right ingredients are in place to enable growth. Our history has shown that when government achieves that, industry runs fast”.
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