The Chambers’ Quarterly Economic Indicator — which is published in partnership with the Fraser of Allander Institute — has been running since 1990, with the surveys offering snapshots of how Scots businesses are faring amid both national and global economic and sociopolitical change.

In addition to the lack of improvement regarding sales, cashflow, and investment, the first Indicator survey of the year has indicated that many businesses are still struggling among the backdrop of rising costs, high inflation, and a cautious labour market.

Specifically, more firms reported a fall (43%) in cashflow than an increase (31%). Across the survey, the manufacturing sector was the only sector to report growth for cashflow, and not a contraction. Similarly, the services sector was the only sector to report growth in profits.

Concern over inflation also remains high across all firms, and has seen little movement over the quarter, with 82% reporting increased concern from it.

Further, 75% reported increased cost pressures from energy costs, 70% reported increased cost pressures from labour costs — including salaries — and 50% reported increased cost pressures from raw material prices.

In terms of the labour market, recruitment difficulties have seen a slight drop of five percentage points from last quarter down to 47%, but the figure still points to a general cautiousness in the wake of economic turbulence, and the narrow avoidance of a UK recession.

“The beginning of 2023 has seen improvement in the prospects of some sectors of the Scottish economy, in line with recent economic data that has been more positive than previously expected,” said Stephen Leckie, President of the Scottish Chambers of Commerce. But it must be noted that “this comes from a very low bar set by the past few years of constant and seemingly never-ending challenges for business.”

“The survey also indicates that many of the big challenges that faced firms in 2022 are continuing to persist in 2023. Cost pressures continue to rise alongside concern from energy bills, inflation, labour shortages, alongside growing uncertainty in the global economy.

“There is a large in-tray of issues for the new First Minister and his cabinet to work with businesses to address, to help put the Scottish economy back onto a path towards unlocking growth and investment.”

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Professor Mairi Spowage, Director at the Fraser of Allander Institute, commented on the Indicator’s results and how they tie in with other research and reports published recently, saying: “The outlook for the UK economy published by the Office for Budget Responsibility (OBR) which accompanied the Spring Budget was significantly more positive than in November.

“Given the uncertainty, and in particular, given the rise in energy bills households and businesses will experience from April, it feels a little premature to be celebrating that the UK has dodged a recession.

“Whilst it may indeed be true that a technical recession will be avoided, it is still going to feel like a difficult time for the economy – with even the optimistic OBR thinking there will be a contraction in growth over 2023.

“So, the overall feeling in the economy seems to be that things are not as bad as we feared a few months ago, but that the bar was pretty low.”