Clearly, the impact of Omicron is growing rapidly and causing considerable pain and 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 increases, and whether or not demand remains strong amongst locals and visitors remains to be seen.
The FSB’s Highlands & 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%) saying that they have done OK or better. Conversely, 8% 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%) of Highlands & Islands businesses said that the potential for future lockdowns or tightening of restrictions was a major fear, and almost a third (31%) 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 – in this release collectively named “Highlands & Islands’ – also looked at staffing, costs and prices charged.
It found that 47% of employers didn’t 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 (44% of all businesses short staffed: 58% West Coast; 51% Islands (Shetland, Orkney, Western Isles), as against 24% for the East and Central Highlands (Caithness to Drumochter, including Moray).
And while just over a third (36%) 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% of Highlands & Islands businesses, with four in ten (40%) saying that their profit margins have shrunk but they are struggling on, a quarter (27%) that they are reducing their ability to invest in or expand their businesses, and almost one in five (18%) that rising costs are impacting on their businesses’ survival chances.
As a result, almost a half (47%) of Highlands & Islands businesses have increased prices this year, and a quarter (24%) plan to do so in 2022. To date, just over two in 10 (22%) have increased prices by less than 5%, but seven in ten (68%) have increased them by between 5% and 20%.
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%) had increased wages to attract staff, 35% said that their inability to pay sufficiently high wages to attract staff was an issue.
“And, with over eight in ten businesses being hampered by rising costs and squeezed margins, 45% 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 demand amongst locals and visitors/potential visitors remains strong in the face of price increases remains to be seen, but, worryingly, some businesses say that they are reacting to the many trials and tribulations that they face by reducing hours and services (57%) or downsizing (16%). More positively, 14% are automating so that they can reduce their dependency on staff.”
END
Notes:
- The FSB Highlands & Islands Small Business Survey covered businesses in Shetland, Orkney, Western Isles, Highlands, Moray, Argyll and Arran
- It took place between the 2nd and 14th of December and generated 204 responses.
- For further information please contact David Richardson at [email protected]