Scottish economy set for return to weak growth

Nia Williams

January 4, 2010

This edition, for the three months ending 30 November 2009, shows 38% of firms surveyed reporting a decrease in turnover, 32% reporting static turnover and 30% reporting an increase, giving a net balance of -8%; an improvement on the previous quarter’s figure of -13% and a significant improvement on the -31% of the same quarter last year – the lowest point in the twelve year history of the Business Monitor.

In contrast to the previous edition, production businesses show the most obvious signs of improvement, reporting a net balance on turnover of -2%, compared with a figure of -24% in the last quarter. Volumes of both new and repeat business have improved in the last three months in both production and service sectors, with the most noticeable rise in new business in the production sector.

Service businesses showed a slight worsening of conditions in the last three months with a net balance of -11% on turnover, compared with -7% in the previous quarter. However, this remains significantly better than the -35% experienced in the same quarter last year.

Expectations of increasing turnover in the next six months have moved into positive territory for the first time in 15 months, but at a net balance of +2%, suggest no more than weak growth in spring 2010. Within this overall figure, production businesses report a net balance of +7% and service businesses a zero position for expectations of increasing turnover.

Professor Donald MacRae, chief economist, Lloyds Banking Group Scotland said: “In 2008, the Scottish economy entered the worst recession for decades and experienced a sharp and large fall in output. Since then, the Business Monitor has shown a gradual improvement from the low point of last year. This latest Monitor shows the Scottish economy set to emerge from recession with improvements evident in turnover, orders and employment.

“However, the recovery will be slow and tentative with many sectors delaying a recovery into growth until well into 2010.”

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