It’s now more than a year on from the first national lockdown and many businesses in the North-east are once again beginning to re-open after a long spell of closure.

Scotland was placed into a strict lockdown from January 5 and, after some slight earlier easing, restrictions were significantly relaxed from April 26. The first quarter of our 2021 Quarterly Economic Survey (QES) was conducted between February 15 and March 8 and examined the economic conditions for businesses during this time and investigated how businesses are feeling about the future.

Was Q1 2021 the toughest quarter for businesses since the start of the pandemic?

Looking at our findings this quarter in comparison to those since the start of the pandemic, trading conditions appeared to be as difficult as they have been at any point since Q2 2020. Over four fifths (82%) of respondents now report that their organisation is currently operating at below capacity. This is up from around three quarters (76%) in Q4 2020 and indicates that the slow increase in operating levels seen since the start of the crisis are now in reverse.

Only a tiny minority (2%) of respondents reported that their cash flow had increased over the past three months. This is the lowest proportion since the CV19 pandemic began and significantly lower than at any point in 2020. Almost half (48%) stated that cash flow has remained the same.

The survey also doesn’t show any improvement in the proportion of businesses increasing their workforce, with the proportion of respondents reporting an increase in their workforce over the past three months remaining constant compared to Q4 2020 (12%).

When asked about when they expect their business to return to pre-pandemic levels of operation, the largest proportion (30%) expected it to be in Q1 to Q2 2022. However, almost a third (30%) said that it would be after that point while only just over a fifth (22%) expected it to be before then. The remainder either weren’t sure or were already operating at or near full capacity.

Despite these difficult conditions, there is some cautious optimism about the future

Turnover is expected to improve, with most respondents (57%) now saying that they believe their businesses turnover will improve over the next 12 months. This is the first-time during CV19 that a majority of participants have said this. The proportion who believe that their turnover will worsen is also well down on previous quarters, at 22% compared to 46% in Q4 2020. There is improved optimism about profitability. A higher proportion than previous quarters believe it will improve, but it is still less than half (45%) of those surveyed who say this.

Fewer businesses than before are expecting a further decline in their workforce. The proportion that expect that their workforce will decrease over the next three months has continued to drop, down to less than a fifth (18%) compared to over two fifths (43%) in Q2 2020 when the crisis first hit.

Office return is considered an import part of any recovery. Almost half (47%) of those from businesses in Aberdeen and Aberdeenshire see a phased return to office spaces / work premises as being extremely important for economic recovery. Almost all (98%) feel that a phased return is important to some extent.

The next phase of reopening takes place within the context of a difficult winter, but the levels of optimism show that businesses believe this will be the last major lockdown. As the recovery progresses, the Research Chamber will continue to monitor the health of our regional economy and help the Aberdeen & Grampian Chamber of Commerce to support members through the challenges that CV19 continues to present. You can read more about North-east business priorities for the 2021 Scottish Election in our manifesto for rebuilding our region.

This research is run by the Research Chamber at Aberdeen & Grampian Chamber of Commerce. If you are looking for more information and data on the regional economy, or want help answering a specific question for your business, then please contact me at stuart.morrison@agcc.co.uk or visit the Research Chamber website.