SCC: Scottish firms raise concerns on tax and labour shortages

Over half of the businesses surveyed expressed concerns over taxation, surpassing worries about inflation. The SCC president Stephen Leckie attributes this to the divergence between Scottish and UK tax policies, with higher income tax rates for some Scottish earners.

Mr Leckie 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.”

In response, Deputy First Minister Kate Forbes has said “in terms of taxation more generally, we do need to keep it under review”.

Speaking on BBC Radio Scotland’s Good Morning Scotland, she added: “We have seen the figures from HMRC over the last few years show that there’s still more people coming into Scotland than leaving Scotland, which is important when it comes to recruitment.

“If you look beyond 2017 basically, at the graph, you see a rise across all wage bands of people choosing to move to Scotland, but we said from the moment that tax was devolved that we needed to keep the behavioural impact under review because we do want to attract people to Scotland and I take the comments that the chambers have made seriously.”

Recruitment difficulties have also worsened, with the majority of businesses citing labour costs as a significant issue.

Mr Leckie added: “More restrictive changes to the immigration system made earlier this year, the increase in the national minimum wage, and skills shortages, are all adding pressure on employers.

“The UK government should address this by introducing a skilled migration strategy which is tailored to the needs of the Scottish economy and restore our reputation as a welcoming and open destination for international students to study, live and work.”

The SCC urges both the Scottish and UK governments to address these concerns with long-term plans to alleviate the burden on businesses and attract talent to Scotland.

Despite these challenges, the survey also highlighted positive trends in cashflow, profits, and investment.

Mr Leckie warned: “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 first step is engaging with businesses in Scotland and across the UK, to instil confidence in a new partnership between government and the private sector which is ready to propel our economy to growth and identify how initiatives such as the National Wealth Fund will support Scottish business.”