Scottish Chambers of Commerce (SCC) released their Business Survey results for the second quarter of 2011 on July 14. The survey, conducted in conjunction with Strathclyde Business School's Fraser of Allander Institute, suggests the fragile recovery continues, but business uncertainties, weak consumer confidence and rising costs threaten to undermine the recovery.
Garry Clark, Head of Policy and Public Affairs at Scottish Chambers of Commerce, said:
"Our latest survey has shown that several sectors of the economy have performed well over the last three months, particularly manufacturing and tourism. It is also pleasing, if somewhat surprising, that the construction sector is reporting a much improved position and it is to be hoped that this improvement will continue. However, underlying this positive image remains the continuing impact of rising material and transport costs and the impending rising energy costs which will take their toll later in the year and these, together with the impact of government spending cuts, will continue to threaten the fragile economic recovery in 2011 and beyond. The combination of weak consumer confidence, rising costs and tightening margins is already well evident in our high streets as retailers struggle to cope with these pressures.
"The strong performance in manufacturing has been well documented in recent months and this has continued throughout the second quarter. It is clear that this growth is in large measure down to strong performance in export markets and we are therefore reliant on continued strong demand in these markets in order to maintain our excellent results in this sector. This means focusing on the growth economies and lessening exposure to some of the more pressured Eurozone economies.
"The tourism sector has reported some of its best figures for three years but occupancy rates are a little lower than in previous years and business demand shows little sign of improvement. Fortunately domestic demand remains buoyant and there is clearly still some life in the 'staycation' market. Interestingly 30% of businesses blamed a lack of effective transport infrastructure as a barrier to growth and this must remain a key priority of the Scottish Government, despite cuts to capital budgets. The need to focus on our tourism sector is one of the reasons why Scottish Chambers of Commerce are calling for the UK Government to devolve Air Passenger Duty to the Scottish Parliament and for the Scottish Government to use this, and a new Air Route Development Fund, to boost international visitor numbers to Scotland.
"Many of Scotland's businesses are performing as well as they can against a challenging background of rising energy costs, inflationary pressures, weak consumer demand and a decline in living standards. With the impact of government spending cuts and reductions in capital expenditure still to be felt, it remains a difficult environment for business, but our hope is that the encouraging start to the year can be maintained."