Three in Four Scottish Businesses Expect to Raise Prices as Chambers Urge Action on Costs

• Labour costs remain the biggest pressure on firms, while utilities, fuel and taxation continue to weigh heavily

• Scottish Chambers of Commerce warns rising business costs will ultimately be felt by households

Almost three quarters of Scottish businesses expect to increase their prices over the next three months, prompting calls for more government action to tackle the rising cost of doing business.

The latest Quarterly Economic Indicator from the Scottish Chambers of Commerce, produced in partnership with the Fraser of Allander Institute, finds that 74 per cent of firms expect to put prices up in the coming quarter – 19 percentage points higher than at the same point last year. Just 4 per cent expect prices to fall.

The findings raise fresh concerns that persistent pressures on businesses will continue to feed directly into the cost of living for Scottish households.

While the survey recorded a positive movement in business confidence compared with the previous quarter, only around four in ten firms reported an increase. Revenues remain under pressure and cashflow and profitability are still negative on balance. Labour costs remain the most widely reported cost pressure, affecting 70 per cent of firms, while utilities and fuel continue to place significant pressure on businesses.

The Scottish Chambers of Commerce said the figures demonstrated why action to improve business competitiveness should also be viewed as part of the response to the cost-of-living challenge.

Charandeep Singh BEM, Chief Executive of Scottish Chambers of Commerce, said:

“These findings are a stark reminder that you cannot tackle the cost of living without tackling the cost of doing business. Rising costs have consequences far beyond individual firms, affecting jobs, investment and ultimately the prices paid by households.

“The UK Government should use the coming Budget to ease these pressures, starting with a reduction in employer National Insurance contributions. Higher employment costs are leaving businesses with less room to recruit, invest and absorb further increases without passing them on to customers.

“The Scottish Government also has important levers at its disposal. Its commitment to reforming non-domestic rates is welcome, but businesses need more immediate action to address the cliff edges in the current system and support investment in our high streets.

“Both governments have an opportunity in their forthcoming budgets to ease the cumulative cost burden on businesses, support economic growth and help contain the pressures feeding through to household bills.”

Doug Smith, Vice President of the Scottish Chambers of Commerce, said:

“The recent movement in business confidence may be an early sign of better things to come, but we should be careful not to mistake that for a recovery in trading conditions. Revenues, cashflow and profitability remain under pressure, and firms have spent several years absorbing higher costs, delaying investment and reconsidering recruitment plans.

“The fact that almost three in four Scottish businesses now expect to put their prices up tells us just how limited their room for manoeuvre has become. When firms are already operating on tight margins, further increases in employment, energy, and other costs leave them with difficult decisions about what they can continue to absorb. Unless those pressures ease, businesses will continue to struggle to find the headroom to invest and grow.”

Responding to the survey, a hospitality firm from Edinburgh said:

“Hospitality businesses continue to face significant pressure from VAT, business rates and energy costs. Despite an annual turnover of more than £2 million, we are operating at close to break even, raising serious questions about our long-term viability.”