Scotland business

Optimism 'returning' on Scottish economy

engineer Image copyright Thinkstock

There are signs that the slowdown in the Scottish economy is coming to an end and business optimism is returning, according to a new report.

The Royal Bank of Scotland's quarterly monitor found more firms expecting sales to grow over the next six months than the number expecting a fall.

Financial and businesses services showed signs of renewed strength in the past three months.

Repeat orders also looked healthy for tourism ahead of its busy season.

However, the survey of 500 Scottish businesses suggested that the oil industry slump was still hurting business in north-east Scotland.

The survey was conducted by the Fraser of Allander Institute, which released its own report this week warning that Scotland may fail to avoid a recession this year.

The RBS survey is more upbeat, with companies across the country expecting to see an increase in business volumes, sales and repeat business during the next six months.

Almost a third (31%) firms reported a fall in the total volume of business during the last quarter, compared with 30% who witnessed an increase in activity.

However, the balance of -1% represented an improvement of 18 points on the first quarter of the year.

'Strong performance'

The performance of financial and businesses services firms was especially strong, with more than one in five (22%) reporting an increase in business volumes.

Overall, a net 18% of firms which took part in the survey said they expected to see a rise in repeat business for the remainder of 2016.

Turnover was strongest within the central belt, where a net 4% of business reported sales growth. This compared with 11% of businesses across Scotland reporting a fall.

In total, a net 13% of firms said they expected sales to grow over the next quarter. Within services, the figure was 16%.

While one in three (35%) of firms enjoyed an increase in the amount of new business, areas strongly associated with oil and gas and agriculture struggled.

Both the north-east and the Highlands and Islands reported no increase in new business.

'Exports challenging'

The report also found that exports had proved "challenging for all businesses".

Just one in five firms (19%) stated that export activity rose, while one in four (26%) saw it fall.

Fraser of Allander Institute director Graeme Roy said: "The latest Royal Bank of Scotland Business Monitor report contains some grounds for cautious optimism with many of the key benchmark indicators improving.

"However, uncertainty appears to be having an impact on some business activities - perhaps most notably capital investment which could have implications for long-term growth. The services sector continues to outperform manufacturing.

"Overall the performance of the Scottish economy since 2015 has been relatively fragile, although this report confirms that growth is likely to return and build momentum through the 2nd half of 2016."

Scottish Economy Secretary Keith Brown said the economy was facing challenges but the RBS survey was encouraging.

He said: "Despite facing subdued global demand and the impact of the oil price on our offshore industry, Scotland's economy has proven resilient and continued to grow - with recent independent forecasts pointing to further growth this year and next.

"Across the world, people are still choosing Scotland as a good place to do business, with record inward investment in 2015 - putting us ahead of all other parts of the UK outside London.

"Despite this, there is no doubt conditions remain tough for companies across Scotland. That is why we will continue to take concerted action to support our economy, creating a competitive business environment in which companies can flourish, creating and protecting jobs and stimulating growth."

More on this story

Related Internet links

The BBC is not responsible for the content of external Internet sites