Fuel costs hitting home for Caithness and Sutherland businesses relying on visitors from the south
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The rising cost of fuel and other living costs is starting to have a real impact on businesses in the far north.
A new survey has shown a dramatic drop in confidence among small businesses across Scotland.
The Federation of Small Businesses’ Small Business Confidence Index for Scotland went from +14.3 points at the start of the year to -31.8 points for the second quarter.
Businesses feel that the outlook for trading conditions over the next few months is decidedly gloomy, for mounting overheads, skills shortages and concerns about the economy are all taking their toll.
To better understand the situation in the Highlands, and reflecting the dominance of the region’s visitor economy, FSB’s Highlands and Islands development manager, David Richardson, spoke to a range of tourism and hospitality businesses across the Highlands about how they and their areas are doing.
Mr Richardson explained that these conversations can never give the same detailed and robust picture as surveys, but said they do give a flavour of what is going on in the region.
He said: “Our most recent Scottish Business Confidence Quarterly Index paints a rather gloomy picture for the country as a whole, but conversations that I’ve had with tourism and hospitality businesses indicate that the picture varies dramatically across the Highlands.
"For while all are affected by the spectacular increase in costs, and staff shortages are severely biting many, it is clear that consumers have changed too. First, the large number of first-time visitors to the Highlands that we saw in 2020 and ’21 – people who would normally have gone to the Mediterranean or music festivals but couldn’t – have disappeared, presumably to go return to their old haunts, and second, some parts of the Highlands are much busier than others."
Mr Richardson found that businesses in the Inverness and Loch Ness area were very busy and those in Badenoch and Strathspey were picking up after a slow start.
“However, the further north and west one goes the quieter, relatively, it appears to get. For while the year started well and the Queen’s Platinum Jubilee saw a great burst of activity, businesses in many more distant areas are reporting that visitor numbers have struggled since.
"Indeed, a few FSB members on the north and west coast said that they might have to start reducing staff hours if business doesn’t pick up soon – something unthinkable even a month ago."
With petrol prices reaching over £2 a litre in places and other household costs putting pressure on purses, Mr Richardson believes the impact on the hardest to reach places could be down to cash.
“Part of it might be down to folk making up for lost time and heading abroad," he said, "but this doesn’t explain why the Inverness/Loch Ness area is doing well. Presumably the real reason is cost. Add the price of fuel to accommodation and other costs, and the view is that the combination is either discouraging people from travelling to distant parts in the first place or reducing their spending power once they arrive."
Despite his concerns for businesses in the far north and west, Mr Richardson said the start of the English school holidays has brought a wave of people north to places like Dingwall and Dornoch, and "hopefully this wave is continuing to flow north and west to all parts".
"Businesses are also welcoming back higher-spending overseas visitors, particularly from Germany, the Netherlands and USA, whether it be on independent holidays, group tours and cruise ships, or things like golfing holidays, and we must build on this for next year.
“As things stand, the autumn’s energy price rise will squeeze UK domestic budgets still further, and we must hope that this doesn’t depress demand next year. But right now, many businesses in the wildest, remotest, most beautiful parts of the Highlands would greatly appreciate your custom!”