SCOTTISH businesses are struggling to grow because of the Brexit deadlock, coupled with rising costs and a global economic slowdown which are discouraging investment or expansion.

In its latest Quarterly Economic Indicator, the Scottish Chambers of Commerce (SCC) said the manufacturing sector faced the biggest impact from Brexit uncertainty in the second quarter of this year, as stockpiling in Q1 meant capacity utilisation was at its lowest level in a decade.

Most sectors reported rising cost pressures for raw materials and overheads, related to preparations for Brexit, with 64% of manufacturing firms and 52% of construction companies listing raw material prices as their top cost pressure.

SCC said every sector in the survey increased wages, except retail, which showed that firms were having to pay more to retain talent as the supply of skilled workers eased.

Nevertheless, it said Scottish companies were demonstrating resilience in the face of persistent challenges. Overall business confidence has made a slight recovery on Q1 when the UK faced a cliff-edge Brexit, but was generally lower than the same period last year.

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Tim Allan, chairman of the Scottish Business Advisory Group and SCC president, said: “Businesses are weighing the costs of the chaos caused by more dithering over Brexit and the burden is severe. Our members are crying out for the return of some sanity as they undertake the important role of creating jobs and paying taxes.

“Whoever the next prime minister will be, they must take brisk action to unlock investment and instil confidence back into the UK economy.

“Scottish businesses need to see steps being taken to avoid a disorderly Brexit and a responsible consensus reached as soon as possible on the Brexit process with the European Union.”

Professor Graeme Roy, director of the University of Strathclyde’s Fraser of Allander Institute, added: “With unemployment at a near record low in Scotland, the survey is starting to pick up evidence of pay pressures on the rise. Many sectors also noted increasing recruitment difficulties.

“This seems to be a particular issue for some sectors. For example, among tourism firms, seven out of 10 recruiting firms reported challenges, with more than half of firms in manufacturing facing similar issues.”