Setback for Scottish fiscal outlook as optimism slips

Ewan Grant, RSM’s head of transactions in Scotland, reacts to the latest economic indicator from the Scottish Chamber of Commerce: 

‘In a time of political and economic uncertainty, it’s not surprising to see a slip in business confidence, but key signals from Scottish manufacturers about reduced orders, staff levels and investment are a real concern. 

‘The net trade balance in Scotland had previously improved, with the increase partly attributable to manufacturing exports to the demand from Brand Scotland overseas. However, today’s drop-in confidence highlights a troubling warning for industry. 

‘Many will be looking to other areas of the economy to counterbalance any economic disruption. However, traditionally strong sectors in Scotland, such as banking, insurance, finance and tourism, are also facing growing pressure. With concerns from the hotel sector over Scottish government exploration of the idea to introduce a tourist tax and any Brexit impact on the banking and finance sector will be acutely felt in Scotland. 

‘In conjunction with the economic performance, the labour market remains strong, with the level of unemployment at historical lows. Nevertheless, such high employment does pose the question of where additional income tax revenue will come from in the future; so will we see further tax increases and greater tax divergence from employees south of the border to fill the fiscal gap?

‘Weighting up the positives against uncertainty, reports of stockpiling in preparation for a potential no Brexit and the impact this could have on core Scottish sectors, a dip in business confidence is unsurprising; but is nevertheless a setback for Scotland’s fiscal future.’