Impact of Pressures on Business

– in the Scottish Parliament on 28th September 2022.

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Photo of Paul McLennan Paul McLennan Scottish National Party

1. To ask the Scottish Government what assessment it has undertaken of the cumulative impact on business of the pressures of a weak currency, high inflation, rising energy costs and Brexit. (S6O-01388)

Photo of John Swinney John Swinney Scottish National Party

The impacts of inflation are affecting businesses across Scotland and have been exacerbated by the United Kingdom Government’s recent announcements, which have seen the pound fall to record lows, and the additional uncertainty that we have seen today.

That comes on top of Brexit. In the most recent business insights and conditions survey, 46 per cent of the businesses that are experiencing exporting challenges said that the end of the European Union transition period is the main cause.

The Scottish Government has engaged extensively with business and supports its calls to the United Kingdom Government for action. However, last week’s mini-budget gives tax cuts for the rich and little for households and businesses that are struggling to pay bills.

Photo of Paul McLennan Paul McLennan Scottish National Party

We have had six chancellors since 2014. The pound was at $1.64 in 2014 and is now at $1.08 and probably falling. Annual inflation was 2.3 per cent; it is now 9.9 per cent, with forecasts of 22 per cent. The UK was in the euro in 2014; since leaving the EU, Scottish exports have decreased by 14 per cent. The energy price cap in 2014 was £1,100; it is now £2,500. We can add the comments by the International Monetary Fund and credit agencies today.

Does the cabinet secretary agree that the so-called stability of the UK economy, which is often mentioned by unionist politicians, is no longer credible in any way and that our businesses are being damaged?

Photo of John Swinney John Swinney Scottish National Party

We are experiencing an acute period of volatility and uncertainty, which was started by Brexit and has been exacerbated by the crisis around Covid, the war in Ukraine and, now, the recklessness of the new Conservative Government. The idea that somehow the United Kingdom can be described as a stable economy, in the light of all the chaos and damage that has been done to business, is a fallacy of the past.

The Deputy Presiding Officer:

We have two brief supplementary questions.

Photo of Michelle Thomson Michelle Thomson Scottish National Party

The Bank of England can only hope that its emergency and unlimited gilt buying operation will be a temporary measure in the defences that are required against an incompetent Tory budget. Former monetary policy committee member Professor Blanchflower said that Kwasi Kwarteng has

“crashed the ... markets ... I’ve never seen such raging incompetence, ever.”

Does the cabinet secretary agree that Scottish people can simply no longer afford to pay the price of being attached to this failing UK state and that the UK Government must not impose swingeing cuts to Scotland’s budget?

Photo of John Swinney John Swinney Scottish National Party

There are three points to make in that regard. First, one of the consequences of the chancellor’s recklessness on Friday is the risk of very significant reductions in public expenditure to try to restore market confidence. That would be a disaster for Scotland.

Secondly, the cost of remaining part of the United Kingdom is now acute for people in Scotland, when we see the damage of Brexit and this fiscal mismanagement.

Thirdly, I am struck by the ridiculousness of the Conservative Party demanding that I replicate the changes that the chancellor made on Friday, when we look at the chaos that has been inflicted on all of us as a consequence.

Photo of Beatrice Wishart Beatrice Wishart Liberal Democrat

What can the Scottish Government say to businesses in the islands, who already face higher costs than their mainland counterparts and fear for their viability as economic confidence falls and overheads and inflation continue to rise?

Photo of John Swinney John Swinney Scottish National Party

One of the issues about which I am most concerned is the scale of energy price rises, even with some of the measures that are now in place, for entirely profitable and sustainable businesses. I give Beatrice Wishart the example—which I have shared openly—of a farmer in my constituency. He explained to me that his energy costs are currently £50,000 a year and that he is being quoted £250,000. A difference of £200,000 is just impossible for that farming venture to find. An individual who is producing food for our domestic market faces the potential of not being able to continue to do so. Beatrice Wishart will have examples such as that one from her constituency.

We have to recognise the enormity of the risk that is faced. The scale of intervention has to be acute, to ensure that businesses that are perfectly viable in every normal circumstance can be assisted through this difficulty, as we assisted them in the context of Covid. However, we should not do that by saddling future generations with the level of borrowing that the United Kingdom Government proposes.

The Deputy Presiding Officer:

We are tight for time all afternoon. I must encourage more succinct questions and answers.