Uncertainty over cuts 'hits Scots business confidence'

The Scottish Chambers of Commerce said firms from all sectors had reduced their expectations for the last three months of the year

Scottish economic growth is slowing as firms await the government's proposals for spending cuts, a survey has found.

The Scottish Chambers of Commerce said all sectors had reduced expectations for the final quarter of 2010 due to uncertainty over the Spending Review.

The poll of nearly 250 firms suggested optimism in manufacturing, construction and retail were at the lowest levels since the first quarter of 2009.

The UK government announces the results of its Spending Review next week.

In his June Budget, Chancellor George Osborne said other departments would face budget cuts averaging 25%, but the full details will be announced on 20 October.

Garry Clark, head of policy and public affairs at the SCC, said: "As business looks towards next week's comprehensive spending review, it is clear that Scotland's economic recovery is going through a very difficult phase.

"Even in manufacturing, which has performed more strongly in recent quarters, confidence, orders and expectations are falling, and export orders have eased.

"We can only hope that next week's announcement, coupled with the forthcoming Scottish government budget, brings certainty and allows business to get on with planning for future growth."

Mr Clark warned that even when the detail of the cuts become clear, future dips in optimism were likely for the year ahead.

"There can be little doubt that ongoing uncertainty over the pace and impact of public sector cuts is sapping business confidence," he said.

"The optimism and sense of improving trading conditions evident in the first half of 2010 have been replaced with more concerns as to weakening trends in turnover and profitability over the next year.

"Constant talk of public sector cuts is undoubtedly damaging business confidence, and it is now time to look beyond the cuts and towards building plans for future growth."

The SCC survey was conducted in conjunction with the University of Strathclyde's Fraser of Allander Institute.