Business owners remain optimistic despite economic uncertainty

Optimism among businesses across the region increased throughout the year but has now taken a hit because of the latest Covid variant, according to a series of business surveys.

 

Five surveys conducted by the Federation of Small Businesses (FSB) in 2021 found that the impact of the Omicron variant is growing rapidly and causing considerable pain and concern to numerous businesses and their suppliers.

 

The survey, which covered all categories of business within the Highlands, Islands, Moray, Argyll and Arran, also highlights staff shortages and utility and other cost increases as two of the greatest threats to business viability.

 

Businesses revealed that these threats are squeezing margins and stimulating enforced price increases, and whether or not demand remains strong amongst locals and visitors remains to be seen.

 

David Richardson, the FSB's Highlands and Islands development manager, said: 'Our latest survey closed on December 14 and, perhaps understandably, it found that businesses are the most positive they've been all year about how trading has gone in 2021, with around three quarters (76 per cent) saying that they have done okay or better. Conversely, eight per cent were really struggling/barely staying afloat.

 

'The Omicron variant started to flex its muscles during the survey period, and the rapidly deteriorating situation as the virus spreads, together with reimposed Covid measures and calls for the public to exercise extreme caution, are taking their toll on trading.

 

'No wonder just over a half (53 per cent) of Highlands and Islands businesses said that the potential for future lockdowns or tightening of restrictions was a major fear, and almost a third (31 per cent) were pessimistic about their futures.

 

'One wonders what impact the news since the survey closed would have had on these percentages.'

 

The FSB's latest survey, which took place between December 2 and 14 and generated 204 responses, also looked at staffing, costs and prices charged.

 

It found that 47 per cent of employers didn't have enough staff to meet their needs, and that the situation was appreciably worse in sparsely populated areas like the west coast and islands.

 

While just over a third (36 per cent) of short-staffed businesses had struggled on as best they could, the rest had to cut services, opening hours or both.

 

Increasing costs have also taken their toll on 85 per cent of businesses, with 40 per cent saying their profit margins have shrunk but they are struggling on; 27 per cent saying they are reducing their ability to invest in or expand their businesses; and 18 per cent saying that rising costs are impacting on their business's survival chances.

 

As a result, 47 per cent of businesses have increased prices this year, and 24 per cent plan to do so in 2022.

 

To date, 22 per cent of businesses have increased prices by less than five per cent, but 68 per cent have increased them by between five and 20 per cent.

 

Mr Richardson added: 'Aside from Covid, the two most potent problems facing businesses from the Mull of Kintyre and Arran in the south to Moray in the east and Unst in the north are arguably the shortage of staff and rising costs, and the two are clearly linked.

 

'As regards the former, lack of suitable accommodation, overseas workers and transport to work are all identified as significant problems, and while a half of employers (52 per cent) had increased wages to attract staff, 35 per cent said that their inability to pay sufficiently high wages to attract staff was an issue.

 

'And, with over eight in 10 businesses being hampered by rising costs and squeezed margins, 45 per cent of them seriously so, it looks like paying higher wages to attract staff from elsewhere in the country is going to become increasingly difficult unless businesses raise prices to pay for it all.

 

'Whether the demand amongst locals and visitors/potential visitors remains strong in the face of price increases remains to be seen, but, worryingly, some businesses say that they are reacting to the many trials and tribulations that they face by reducing hours and services (57 per cent) or downsizing (16 per cent).

 

'More positively, 14 per cent are automating so that they can reduce their dependency on staff.'