SCOTLAND’s business leaders are calling for a “clear steer” from government to address the problems facing an economy they describe as “subdued”.

The message came in the latest quarterly indicator from Scottish Chambers of Commerce (SCC) and the University of Strathclyde’s Fraser of Allander Institute.

It examines five of Scotland’s key business sectors - construction, financial and business services, manufacturing, retail and wholesale, and tourism.

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Scottish Government figures earlier this month showed the country’s economy contracted at the end of last year, and the report indicated that although business performance remained subdued in the first quarter of the year, there were mixed expectations among firms.

It said: “The construction sector reported a slight weakening in performance and optimism since last quarter and is significantly down on Q1 2016. Optimism is now at its lowest since Q3 2014, with employment also at its lowest trend level since Q4 2013.”

Financial and business services reported its highest levels of optimism since Q4 2014, which, said the report, could reflect that over a third of oil and gas businesses are now more positive about the future.

“The manufacturing sector is reporting growing optimism after a mixed year in 2016,” said the report. “Domestic orders and sales revenues are flat but performance has been boosted by the rest of the UK and export markets. Retail and wholesalers have reported optimism back in negative territory, with sales revenues at their weakest since Q4 2015 and cash flow at its weakest since Q4 2015.”

Neil Amner, chair of the SCC’s economic advisory group, said: “In January, our survey warned that Scotland’s economy stood on a knife edge and these latest figures point to continued subdued performance in the early part of this year.

“However, the picture across the various sectors is less even than it was at the end of 2016, with the manufacturing sector recording very encouraging results, again driven by exports. The financial and business services sector has also rebounded significantly from its position at the beginning of 2016, though this is at least in part as a result of a significant improvement in the prospects of oil and gas service sector businesses from a low base. The outlook for construction is again fairly flat and performance in both retail and wholesale and in tourism looks to be negative in comparison to the same period last year... Warning signs continue to be manifested in terms of higher prices; for example, the retail and wholesale sector has reported its highest prediction of price rises since the third quarter of 2011: a time when inflation stood at over five per cent. There are also worrying signs of declining investment trends, particularly in the tourism sector, which has suffered as a result of this year’s business rates revaluation.

“Uncertainty is the word that is on everyone’s lips.

“To help businesses to deal with that and to get back to investment and job creation, we need a clear steer from our governments north and south of the border that business success is a clear priority,” added Amner.

“As we approach a General Election, we expect the political parties to pledge targeted tax cuts, potentially including a temporary cut in VAT, in order to bolster consumer demand.”