Highland business's optimism badly dented by the rise of Omicron, FSB study reveals
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Optimism amongst Highlands and Islands businesses increased as the year went on, but it has now taken a big hit thanks to Omicron. So finds the last in a series of five business surveys conducted by the Federation of Small Businesses (FSB) in 2021.
The impact of Omicron is growing rapidly and causing considerable concern to numerous customer-facing businesses and their suppliers, but the survey also highlights staff shortages and utility and other cost increases as two of the greatest threats to business viability.
Moreover, these threats are squeezing margins and stimulating enforced price rises, and whether or not local and visitor markets can take these increases remains to be seen.
The FSB’s Highlands and Islands development manager, David Richardson, said: “Our latest survey closed on the 14th of December 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 OK 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 covered all types of business in Highlands, Islands, Moray, Argyll and Arran also looked at staffing, costs and prices charged.
It found that 47 per cent of employers did not have enough staff to meet their needs, and, given relatively small sample sizes, that the situation was appreciably worse in sparsely populated areas like the west coast and islands, with 58 per cent on the west coast reporting they were short staffed and 51 per cent on the islands (Shetland, Orkney, Western Isles), as against 24 per cent for the east and central Highlands (Caithness to Drumochter, including Moray).
And while just over a third (36 per cent) of short-staffed Highland 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 Highlands and Islands businesses, with four in 10 (40 per cent) saying that their profit margins have shrunk but they are struggling on, a quarter (27 per cent) that they are reducing their ability to invest in or expand their businesses, and almost two in five (18 per cent) that rising costs are impacting on their businesses’ survival chances.
As a result, almost half (47 per cent) of Highlands and Islands businesses have increased prices this year, and a quarter (24 per cent) plan to do so in 2022. To date, just over two in 10 (22 per cent) have increased prices by less than five per cent, but seven in 10 (68 per cent) have increased them by between five per cent and 20 per cent.
David 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 market – both locals and visitors – can take price increases remains to be seen, but, worryingly, some businesses say that they are reacting to these trials and tribulations 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.”
