Tax and recruitment concerns threaten business growth – survey

Concerns around taxation and recruitment threaten Scotland’s economic growth, a leading business survey has found.

The quarterly economic indicator survey for the Scottish Chambers of Commerce (SCC), which surveyed 410 businesses between May and June 2024, found the two issues were the leading concerns for firms.

Taxation occupied 52% of concern, overtaking inflation on 50%, with the SCC’s president Stephen Leckie warning divergence between the Scottish and UK Governments may have exacerbated anxieties.

Those in Scotland earning more than £28,867 pay more income tax than their UK counterparts following changes from the Scottish Government, while a 45% advanced rate was introduced for those earning between £75,000 and £125,140.

Meanwhile, recruitment difficulties increased from 47% to 55% compared to the last quarter, with labour costs impacting upon three quarters of firms.

Mr Leckie said both governments must set out plans to address taxation concerns. He said: “Taxation continues to concern firms, to the extent that the issue has overtaken inflation as the leading concern.

“This is having a major impact in attracting and retaining talent in Scotland, contributing to the significant labour challenges many businesses are already experiencing. Divergence on personal taxation has exacerbated the issue.

“Businesses will be looking to both the Scottish and UK Government to set out long-term plans to address the current state of taxation which is impacting growth, investment and talent.”

The survey also showed “significant improvement” in cashflow and profits for firms, while investment trends remained “generally positive”, according to the report.

Mr Leckie added: “Our latest survey indicates generally improving business conditions across the economy, albeit significant challenges continue to persist which are limiting the ceiling on potential growth and investment.

“The impetus to deliver a credible plan for sustainable growth lies with both the Scottish and UK Government. Now must be the moment to focus on long-term solutions to tackle poor productivity and create an environment for business investment to accelerate.”

The UK and Scottish Governments have been asked for comment.