Scotland’s top private firms have suffered a drop in combined profits amid a climate of growing political and economic uncertainty, according to Grant Thornton.
The leading financial and business adviser’s annual Scotland Ltd report assesses the commercial performance, in the last year, of Scotland’s top 100 privately owned limited companies. This year’s findings reveal total combined profits of £16.6 billion – down from £20.8 billion in the 2015 report.
The challenging times facing the business community is also reflected in employment statistics, with a total of 110,632 people working for the top 100 firms – down from 116,284 in 2015.
The success of Scotland’s Food and Drink sector is once again reflected in this year’s report. The industry group contains the highest share of businesses in the top 100, including our number one ranked business William Grant and Sons Holdings Limited. A total of 24 Food, Drink and Leisure businesses make this year’s list, an increase of 3 from 2015. However, the sector isn’t immune from the current economic challenges facing the country. Despite more firms from the sector making this year’s list, combined turnover is £1.7 billion lower than last year’s report, at £20.8 billion.
James Chadwick, Head of Food and Drink at Grant Thornton in Scotland, said:
“The Food & Drink sector in Scotland remains on course to exceed its £16.5 billion valuation target by the end of 2017. The industry deserves the credit it is receiving worldwide. Hard work and serious collaboration has resulted in a complete turnaround in perceptions and revenues. However, there is no doubt that Brexit and other political uncertainties will have an impact. To an extent, we’re holding our breath, waiting to see what might happen to exports and trading conditions. But, the hard work has already been done and the industry is in a strong, healthy position, ready to take on the challenges that lie ahead.”
David Thomson, CEO of the Scottish Food and Drink Federation, added:
“Scotland’s food and drink industry remains strong and vibrant – as this report demonstrates. With 24 out of the top 100 businesses working in the Food and Drink sector, our companies are of critical importance to Scotland’s economic future. There are significant challenges on the horizon. It is essential that the Food and Drink sector is given assurance as we begin to negotiate our exit from the European Union. With currency fluctuation, import prices have risen, and the price of food is likely to go up early in 2017. Food and Drink companies rely on EU workers, valued employees who bring important skills and expertise. Their future – and Britain’s future immigration policy – must be clarified as soon as possible. Holyrood and Westminster should ensure that they prioritise such a critical industry in EU negotiations where there is a minefield of complex legislation.”
While this year’s findings highlight some of the real concerns facing Scotland’s private businesses, one sector reflects the resilience and commitment to sustainable, long term growth. The Energy sector faced some of its biggest challenges in 2016, with Aberdeen and the north east bearing the brunt of the oil and gas downturn. Some estimates suggest the North Sea sector has lost as many as 100,000 workers since 2014. But, this year’s Scotland Ltd data raises some cautious optimism. 9 companies have made this year’s top 100 – up from 7 in 2015. Turnover is also up from £1.2 billion in 2015 to £1.4 billion.
Ian Knott, Advisory Director for Grant Thornton in Aberdeen, commented:
“For those who can remember the impact of the 1980s oil glut on the Aberdeen economy there were some unsettling signs over the last two years that this latest downturn could be just as prolonged and damaging. But, despite the many issues facing the industry and the region right now, there are reasons to be optimistic. The industry has been here before and pulled through, reflecting the resilience of a sector that is built on innovation and overcoming significant challenges. The latest crisis has forced political and business leaders to focus on some of the chronic issues that have developed in recent years. The North Sea is a mature and complex environment that has experienced structural constraints together with rapid and unsustainable cost inflation at a level that would eventually impact the longer term viability of the basin. “The oil price decline has forced the industry to reduce costs and increase efficiency, looking at everything from the potential to use innovative new technology to maximise financial returns to planning for better decommissioning. There has also been increased activity to identify opportunities internationally by leveraging the expertise developed in the North Sea. The shorter term prospects for Scotland’s energy sector remain challenging but, in the longer term, with greater collaboration and a focus on maintaining a sustainable cost base it can continue to play a major role in the success of our national economy.”
Scotland’s Property and Construction sector has witnessed a cautious and consistent recovery following the 2009 global economic downturn, which had a significant impact on the industry. Aided by a raft of national infrastructure projects, a new found self-confidence in the sector is reflected in our Scotland Ltd 2016 data. 20 Property and Construction companies make our top 100, up from 17 in 2015. Meanwhile, the number of people directly employed by the Property & Construction firms within our top 100, now stands at 14,571 – almost 2,000 more than last year. The rate at which the industry has recovered is highlighted by three businesses in our list. With a combined turnover of more than £394 million, Balmoral Group Holdings Limited, CCG (Holdings) Limited and Advance Construction Group Limited are our top 100’s ‘biggest movers’ in the Property and Construction sector witnessing rapid revenue growth. Balmoral Group Holdings Limited alone witnessed a turnover growth of more than 72%. Despite the promising signs, the next year brings new risks. Many of the major projects helping to reinvigorate the sector depend on European funding and EU workers. A potential ‘hard Brexit’ could have major consequences for an industry only starting to get back on its feet. 2017 could be the year, Scotland’s Property & Construction sector is tested more than ever.
Lorraine Macphail, Head of Property and Construction in Scotland, at Grant Thornton, said:
“The industry has worked tirelessly to rebuild itself after a period which almost devastated it. Thousands of jobs were lost and many projects mothballed, but we’re now finally starting to see the shoots of sustained recovery. You just have to look at cities like Glasgow, Edinburgh, Dundee and, even Aberdeen, and it’s hard to miss the sight of cranes and workmen. Sadly, the fresh risk of withdrawal from the single market means many of the challenges of 2009 could return. The next few months will be crucial if Scotland’s Property & Construction sector is to continue to grow and rebuild lost ground.”
Key Scotland Ltd 2016 findings:
– Combined turnover of our top 100 firms is £16.6 billion
– The total number of employees working for our top 100 firms is 110,632
– Food, Drink & Leisure has the highest share of businesses in our top 100 (24%)
– Glasgow has more companies in our Top 100 than any other city in Scotland (25), followed by Edinburgh (15) and Aberdeen (9)