One in four North-east companies are planning to cut their workforce over the next three months, a new report has warned.
A
downturn in North Sea activity – a direct result of the UK Government
increasing tax on oil and gas operators to 78% – is damaging the wider economy
in Aberdeen and Aberdeenshire, according to the latest North-east Quarterly
Economic Survey.
It shows
that 24% of firms surveyed – two-thirds (67%) of
which do not work directly in energy – expect to reduce their workforce in the
coming months, the highest level recorded since the CV19 pandemic in 2020.
A third
(34%) expect turnover to drop, compared to just 20% across the rest of the UK,
again the worst figures recorded since the pandemic.
The
survey, run by Aberdeen & Grampian Chamber of Commerce, in
partnership with law firm Gilson Gray LLP, benchmarks key indicators in
the region’s economy against the wider UK.
The
report highlights a deepening divergence between local and national business
confidence. While some UK indicators are showing signs of stabilisation, firms
in Aberdeen and Aberdeenshire are dealing with falling sales and continued
uncertainty over energy policy.
A sharp
drop in investment – particularly in staff training and equipment – also points
to a weakening long-term outlook for the region.
Nearly
four in ten firms (38%) reported falling sales in the last quarter, while
forward orders have dropped to levels not seen since early 2021.
Business
confidence is also falling, with only 30% of respondents expecting turnover to
improve in the year ahead, while 49% anticipate a fall in profitability. This
contrasts sharply with UK-wide averages of 49% and 28% respectively.
Taxation
has emerged as the most significant barrier to growth for North-east
businesses, with nearly three-quarters (73%) citing it as a growing concern,
far higher than the UK average of 56%.
While
worries around inflation and interest rates have eased slightly since the start
of the year, firms report that the cumulative burden of the Energy Profits
Levy, National Insurance increases, and rising wage costs is stifling
investment and squeezing margins.
The
Chamber has called on the UK Government to remove the Energy Profits Levy as
soon as possible to prevent further damage being done.
Russell Borthwick,
Chief Executive of Aberdeen & Grampian Chamber of Commerce, said: “These
figures show the economic consequences of policy decisions being made in
Westminster.
“Our
members are not calling for special treatment – they are simply asking for
fairness and a stable environment in which to plan, invest and grow.
“The UK
economy cannot afford to turn its back on the North Sea – nor on the thousands
of businesses in this region that depend on it.”
Findlay
Anderson, Partner at Gilson Gray LLP, said: “These findings reflect a deepening
economic malaise in the North-east, which is being exacerbated by short-term
policymaking and a lack of clarity around the UK’s energy future.
“Businesses
are delaying investment decisions not because of a lack of ambition, but
because the conditions for growth simply don’t exist right now.
“What
we’re seeing is a loss of confidence – not just in the energy sector, but
across the supply chain and wider economy.
“The
Energy Profits Levy, coupled with increased employment costs and policy
volatility, is creating an environment where firms feel unable to plan ahead.
Unless we see a shift in direction soon, the risk is long-term damage to the
competitiveness of this region.”
Established
in 1989, the Quarterly Economic Survey (QES) is run by the British Chambers of
Commerce network and is the UK’s largest and longest-running independent
business sentiment survey.
It’s the
largest and most representative independent business survey of its kind in the
UK and its findings are closely watched by policymakers such as the Treasury,
the Bank of England and the Office of Budget Responsibility.