Cost pressures placed on Scottish companies have risen to the highest level for nearly a decade, according to a report by the Royal Bank of Scotland.

The RBS business monitor suggested that inflation and increased business pressures were having a detrimental impact on operational activities – with almost two-thirds of companies reporting higher costs during the second quarter of 2018.

Companies have said they expect the trend of rising costs to continue for the rest of 2018. Overall, the outlook for Scottish business is positive. Ongoing growth and strong sectors are playing a critical role in cementing Scotland’s position as an attractive place to do business.

Increased Pressure.

The survey, conducted by the Fraser of Allander Institute, involved more than 400 companies, many of which are experiencing unprecedented cost pressures.

Cost pressures in services were heavy, up around 63%, with production industries also experiencing increased pressure (50%). Tourism and distribution both experienced the worst increase in cost pressure by 82% and 70% respectively.

Exports Booming

Despite an increase in cost pressure upon Scottish firms, the majority of those surveyed told the Fraser Allander Institute that they had experienced an increase in activity over the last three months. Additionally, the survey highlighted a strong pick-up in business among Scottish exporters.

Around 23% of Scottish firms experienced an increase in export activity between March and June 2018. However, 16% did report a decline in exports.

A weakening currency at home and global growth acceleration are playing a crucial role in fuelling the economy during the first half of 2018.

Strong Growth Areas

More than one-third of companies reported increases to the total volume of business during the previous quarter, with only 29% reporting a fall in activity.

The number of new businesses in Scotland grew significantly, according to the report – with West Central Scotland and East Central Scotland fairing strongly at 33% and 26% respectively.

While Southern Scotland performed weaker (6%), growth is still evident and, according to Float CEO, Colin Hewitt, the outlook should remain positive.

He said: “Scottish business is booming, but while activity and growth are on the up, so are costs. Everybody is feeling the pinch.

“Overall, Scotland is a fantastic place to do business. I think a lot more business owners are seeing cities like Edinburgh and Glasgow as attractive low-cost alternatives to London, with access to skilled staff, fantastic local universities, and thriving communities of local businesses.”

Scotland’s ongoing growth, Hewitt believes, also presents a valuable opportunity to explore alternative means of finance and lending.

“On a positive note, there’s more access to finance than ever before”, he said. “Now is a good time to explore alternative finance options such as Peer 2 Peer lending – there are some great Scottish companies leading the way in this space such as Lending Crowd and Orca.”

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