The Scottish Chambers of Commerce (SCC) has said that support for Scottish construction businesses must one the priorities amid “very acute fears” that the economy north of the Border could fall into recession as a result of the UK’s decision to leave the European Union.

The business body’s leaders have called for tax breaks and certainty on the future of foreign workers amid signs that Scotland’s economy was slowing down even ahead of the ‘Brexit’ vote.

The SCC’s Quarterly Economic Indicator survey, carried out in collaboration with the University of Strathclyde’s Fraser of Allander Institute, suggested the construction sector was slowing in the three months to 30 June.

“Although many balances remain positive, they are lower than the same quarter of last year. Investment trends have grown more slowly and are forecast to fall next quarter for a net -4 per cent of businesses,” the report said.

The Quarterly Economic Indicator engages with five of Scotland’s key business sectors: Construction, Financial and Business Services, Manufacturing, Retail & Wholesale and Tourism.

The report, published today, shows the Scottish economy generally was in a fragile state in the second quarter and reveals balances were down in the financial, business services, manufacturing and retail sectors as a sharp slowdown was felt in the overall growth of services companies – even those not involved with the already beleaguered oil and gas sector that has been hit by languishing global oil prices.

Specifically on construction, sales revenues for Q2 2016 were encouraging with positive net percentage balances recorded for domestic and overall sales revenue. Exactly 48 per cent of all businesses indicated that overall sales revenue had increased over the quarter, resulting in a net percentage balance of +22.

Although this figure was higher than the net percentage balance of +21 recorded in Q2 2015, it was lower than the negative net percentage balance of +26 recorded in the first quarter of 2016. Positive trends in sales revenue are expected to continue in Q2 with 46 per cent of businesses predicting a rise, resulting in a net percentage balance of +18.

The majority of businesses in the construction sector (52 per cent) expect to increase their prices in the third quarter of 2016, giving a net percentage balance of +49. Only 4.0 per cent of businesses in the sector anticipate a fall in prices.

The majority of businesses (54 per cent) stated that their employment levels remained the same over the quarter and only 10 per cent indicated that their levels of employment decreased, giving a net percentage balance of +24. However, 48.6 per cent of those businesses recruiting in the construction sector are currently facing recruitment difficulties.

Neil Amner, chair of the Scottish Chambers of Commerce Economic Advisory Group, said: “Our survey shows that Scottish business performance was generally muted during the lead up to the EU referendum but of course the burning questions are how the vote for the UK to leave the European Union will affect businesses and what steps our Governments in the UK and in Scotland should take to ensure that Scotland’s businesses continue to be the dynamo of economic growth.

“There were some signs of weaknesses in investment and difficulties in recruiting skilled workers over the past three months and these are illustrative of concerns which may persist after the Brexit vote. Additionally, businesses in some sectors such as retail and tourism have been flagging up increases in costs, coinciding with the introduction of the National Living Wage in April this year. Meanwhile for larger businesses, the prospect of tax rises through the introduction of the new Apprenticeship Levy is on the horizon.

“The Brexit vote does not come without its opportunities but business must be in the driving seat if we are to take advantage of these and, indeed, secure the stability that is needed to foster investment and deliver future growth. Central to future planning is the need for clarity on the future of talented individuals currently working in Scotland. Everyone must have the confidence that they will be able to fulfil their long term ambitions in Scotland, whether they currently live here or not. Scotland must become an even more attractive place to do business and must actively reach out to the world to create new trading and investment opportunities.

“Business is the engine of the Scottish economy and this is now the time to make sure that the engine is running smoothly and efficiently if we are to rise to the challenges of Scotland’s new circumstances. The Scottish and UK Governments must utilise all available powers to make businesses more competitive. In particular, they need to reconsider policies which have sought to impose greater burdens on business and instead use the ‘levers of power’ politicians so often talk about to actually support business and the wider economy, providing a strong and confident platform for future growth. For example, by cutting business rates, accelerating reductions in Air Passenger Duty and putting the Apprenticeship Levy on hold.”