A new survey from the Scottish Chambers of Commerce has found that taxation concerns are growing among businesses, with 55% reporting being worried about potential tax increases, up from 35% last year.

The latest Quarterly Economic Indicator shows that anxiety around increases to business rates and higher taxes, particularly in light of Labour’s imminent Autumn Budget, are taking a toll, with 77% of businesses in the tourism sector and 70% in retail saying they are concerned, reaching five-year high. 

The survey of 405 Scottish businesses, carried out in partnership with the Fraser of Allander Institute, also shows that pressures on cashflow and profit margins are limiting growth.

In four out of the five business sectors surveyed, businesses said they had seen a fall in profits, with only the services sector showing an increase, although still significantly down on the same quarter last year.

The report, which is Scotland’s longest-running business survey, warns that cash flow remains a considerable challenge as three out of five sectors reported seeing a contraction in cash, with only the services and tourism sectors reporting growth on balance.

Although cost pressures on businesses have eased slightly over the quarter, and significantly since this time last year, 70% of businesses still said they were worried about increasing labour costs, while concern around spiralling energy costs also remains significant, with over half of firms (53%) citing it as a top concern.

Another problem for Scottish businesses is the continued difficulties around recruitment, although these seem to at least be ebbing slightly. Labour market concerns are now down to 50% compared to 55% in the previous quarter, and down from 60% compared to last year.

“We are now 100 days into the new UK government, and we have still not had positive action on the many issues we face,” said Dr Liz Cameron, chief executive of the SCC.

“The Autumn Budget is a chance to reset the relationship with business and work in partnership to create jobs and stimulate growth. We have put forward many realistic solutions to encourage investment and ease business pressures, but the test is whether the new government is truly listening as they promised pre-election.

Recommended reading

• Scottish National Investment Bank’s Income Grows by More Than 80%
• Edinburgh Uni Surpasses Innovation Goal By Fourfold
• Scots Business Confidence Takes a Downturn

According to data from the Fraser of Allander Institute, the Scottish economy got off to a positive start in 2024, with growth rates reaching 0.6% in the first quarter and 0.5% in the second quarter. Since then, however, economic growth has been more hesitant, faltering over the summer months with only a slight recovery in July at 0.3%. 

The findings from the SCC are more evidence that business confidence is waning in Scotland, reflecting the latest results of the Bank of Scotland’s Business Barometer, which showed a 16 point fall in business confidence during September, at 48%.

That’s a sharp turn from August, when the Business Barometer showed companies in Scotland reported higher confidence, rising 13 points to 64%.