Alex Tait

But whilst the Trade and Cooperation Agreement with the EU has been largely welcomed by middle market businesses, RSM says the absence of clarity around key issues in Scotland, including financial services and fishing, explains the lag on improving sentiment, to add to that fuelled by the global pandemic.

The firm’s Index, an aggregated performance indicator of currency, bond and equity markets, has made a slow climb, from -0.9 below normal stress levels in Q3 2020, to a reading of -0.1 yesterday.

The climb has been bumpy, reflecting the nervousness fuelled by the further UK lockdown restrictions since Q3 and the uncertainty surrounding Brexit negotiations. Nonetheless, it seems the commencement of the vaccine rollout and the fact a deal with the EU has happened is allowing businesses to take a more optimistic long-term view for 2021 that will start to accelerate during Q1 2021. 

Alex Tait, RSM’s regional managing partner in Scotland, commented: “Long term, the signs are improving. Our index supports the notion of a relatively improved pace of economic activity in the second half of this year linked to the national distribution of Coronavirus vaccines and a sustained increase in consumer spending near to 6%. Whilst sentiment has been slow to improve, we’d expect to see the index climbing into positive territory over the coming weeks as the ongoing vaccinations progress and the impact of the EU deal moves into view.

“We have a real concern however around the gaps within the EU deal that haven’t yet been finalised. The financial services industry gets relatively little mention, which will have a huge impact on Scotland’s economic future due to the scale of the sector north of the border. Unknowns exist particularly around the impact of the non-continuation in ‘passporting’ and the ease of access for UK-based financial services into the EEA.

“The full impact on the fishing industry related to phased changes to quotas, access to markets and increased paperwork and is also hard to gauge, so you could say that several key sectors in Scotland left the EU with the need for further clarity.”

He added: “Looking to the positives, the travel, leisure, hospitality and retail sectors will all experience marked increases in consumer demand by mid/late-summer 2021 if current projections persist.

“As a staycation destination, Scotland could see an uptick in visitors throughout 2021 as consumer choose to holiday in the UK rather than travelling abroad – which would be a real boost for the sectors, such as hospitality and food and drink, which were hardest hit by the pandemic.”

Despite the positives, Mr Tait ended with a cautionary note: “Day to day resilience and for many, survival, will still be the priority for many Scottish businesses. This will likely be the case until at least Easter when there’s hope of the beginnings of a rebound if business and customer confidence returns.”