Comment: Service sector best bet to take up slack

Service sector is still best bet to take up slack, argues Martin Flanagan.

Service sector is still best bet to take up slack, argues Martin Flanagan.

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THE good news in the latest Business Monitor from Bank of Scotland is that the Scottish economy looks to be doing better after the disconcerting slowdown at the start of 2015. That was particularly disappointing as it followed a generally positive 2014 in terms of the expectations of Scottish businesses on their prospects, mirroring the situation in England.

Turnover for Scottish businesses has largely recovered in the three months to May, even if it is nowhere near as benign a picture as this time a year ago, and there is a stark contrast between a healthier services sector and a still largely becalmed manufacturing industry.

The latter remains hobbled, as is the case south of the Border, by the strength of sterling against the euro. Even so, Scottish business expectations for the remainder of 2015 are at their fourth best level in more than seven years, which did not look the case early this year.

Further good news is that exports should pick up as an economic recovery continues to make headway in the euro currency bloc’s countries, aided by the European Central Bank’s late conversion to the western quantitative easing club.

Those positive factors will only strengthen if the Greek crisis resolves itself amicably, which looks a bit more likely currently than it did just a few days ago.

There have been calls in some quarters for Chancellor George Osborne to include a cut in national insurance contributions for manufacturing to help get the sector motoring again.

But in the current continuing climate of austerity this looks a fond hope.

Instead, it looks like the Scottish services sector is still the best bet to take up the slack as we go forward as a result. It was not exactly ever thus, but it has been for a generation.

Hawks on the rise

THE minority hawks on the Bank of England rate-setting committee are getting a bit of wind in their sails as rising wages and low unemployment are set to fuel inflation as this year goes on. It still looks more likely than not that any interest rate rise will be delayed until the first half of 2016, but you sense a slight change in the background mood music for one.

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