Firms ease back on investment amid Gulf uncertainty – Daily Business

The Iran conflict is putting pressure on global supplies

More than three quarters of mid-sized companies (76%) in Scotland intend to halt or reduce investment as they wait for the situation in the Gulf to stabilise, according to new research.

The impact of the conflict could leave companies making difficult decisions, with 32% cutting back on hiring and 30% looking to increase prices.  

However, a re-evaluation of priorities could also present growth opportunities, as companies seek to shore up their supply chains in light of ongoing pressures. 

The research from accountancy and advisory firm BDO showed that 26% of business leaders in Scotland are looking to prioritise UK-based suppliers, and a further 32% are considering onshoring or nearshoring, in a move that could provide a boost to Scottish manufacturing.  

The survey was published amid ongoing talks to end the crisis. Oil prices have fallen sharply on hopes of a deal that were raised over the weekend.

US Secretary of State Marco Rubio said negotiators had a “pretty solid thing on the table”, though Iran said that a deal was “not imminent”.

The bi-monthly survey of mid-sized businesses with revenues between £10m and £500m, has revealed that supply chain pressures including material delays and costs, stock shortages, and suppliers folding were a top concern for two in five Scottish business leaders (40%) as they navigate this latest economic shock. 

Mid-market companies are a key segment of the Scottish and UK economy, contributing more than £1.8 trillion in revenues and accounting for one in three private sector jobs. However, the current geopolitical climate could impact future growth plans within Scotland. 

Last week, BDO’s monthly Business Trends report revealed that its Output Index had risen slightly in April, fuelling suggestions that businesses were frontloading resources ahead of suspected volatility expected later in the year.  

As a result of these challenges, business leaders in Scotland are looking to the government for additional support in case of further escalation. Popular policy or support measures for the next 12 months include transport and fuel cost relief, energy costs relief and dedicated supply disruption support (e.g. the creation of new grants for businesses that are materially impacted). 

James Paterson, head of tax at BDO in Scotland, said: “The mid-market is vital to Scottish and wider UK growth. These companies are an overlooked engine of our economy, but instead of focusing their sights on expansion, they are struggling to absorb the latest economic shock in an uncertain global and political backdrop. 

“Mounting pressures around energy, fuel costs and supply chains, which were issues affecting businesses even before the conflict in Iran, are only adding to the sustained feeling of uncertainty amongst Scottish business leaders. 

“The Scottish government must ensure it listens to the wants and needs of business leaders in this crucial segment. Businesses desperately want stability and certainty so they can focus on growth.

“Part of this is also understanding the tax roadmap for Scotland in the years to come which could involve an alignment of tax rates with the rest of the UK and a commitment to support Scotland’s key sectors.

“Reassurances in these areas could help to deliver some much-needed long-term visibility to help them plan with more confidence and so boost the wider economy.”

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