Rising prices of energy, food and raw materials, coupled with labour market insecurity and a tightening of consumer purse strings have shrouded the economy with weaker growth prospects.

The perfect storm of the costs crisis, exacerbated by the conflict in Europe, has led to a cashflow crunch which has frozen investment, led to price increases for consumers and squeezed profit margins.

Key findings include:

• Inflation concerns dominate: UK inflation has reached 9.1%, the highest in 40 years. Since April 2022, inflation has doubled and 9 in 10 Scottish firms across all sectors surveyed are continuing to report major inflationary pressures.
• Cost pressures pile on: Businesses continue to be impacted by rising energy bills, 7 in 10 firms report that it is the largest contributor to their cost pressures. Fuel and labour costs, alongside raw material prices, are also significant concerns.
• Firms to raise prices: Over three quarters of all firms (77%) have indicated that they intend to raise prices next quarter. The sectors that reported the largest increases from the previous quarter were the financial & business services and tourism sectors.
• Labour market uncertainty: Recruitment difficulties have seen a 10% increase from the previous quarter, with half of all firms reporting increased challenges hiring staff. The sectors that saw the largest increases from Q1 2022 were the financial and business services, manufacturing and retail sectors.
• Investment frozen: Decisions on investment have been held back with 50% of all firms reporting no changes to levels of investment in the next quarter. The construction, retail and tourism sectors have reported significant cuts to investment over the last quarter.

Stephen Leckie, president of the Scottish Chambers of Commerce, said: “The latest Scottish Chambers of Commerce business survey reveals that cost and inflationary pressures are deterring investment and forcing businesses with little choice but to make difficult decisions for business survivability. These include holding back or in some cases pulling back investment, putting projects on hold due to supply chain disruption, and in extreme situations considering whether or not to have the heating and lights on or off.

“Urgent action is needed now from the Scottish and UK Government if we are to reverse the tide of economic decline, restore confidence and put the economy back on the road to growth.”

Mairi Spowage, director at the University of Strathclyde’s Fraser of Allander Institute, said: “The consequences of rising inflation are being felt across the economy, with clear signs that consumer confidence is being dented and that people are cutting back on both essential and non-essential spending.

“Alongside this, there is an increasing fear that high inflation will be more persistent than was first thought, with expectations now that it may be 2024 before we get back to more normal levels of inflation.

“This survey published today highlights concerns that businesses have about rising costs. Current data suggests that the experience of input price rises for businesses is running at 22%: still more than double the consumer inflation rate.

“This may mean that these cost pressures may continue to feed through to prices experienced by consumers as more businesses face difficult choices.

“Given this environment, it is not surprising in this latest set of results that we have seen a dip in confidence across sectors.”