FURTHER action may be needed to support Scotland’s “fragile” economic recovery, according to a hard-hitting report published today.
Business confidence during the fourth quarter of last year was stronger than in the final months of 2012, the latest poll conducted by the Scottish Chambers of Commerce (SCC) and Strathclyde University’s Fraser of Allander Institute found.
This was the case across all sectors, with manufacturing, construction, retail and tourism all at their most buoyant since the onset of the recession.
However, employment trends were mixed, with declining staff numbers in construction, wholesale and tourism. Other areas of concern included the low levels of cashflow reported by some manufacturers, which could limit their ability to expand as demand rises.
SCC head of policy Garry Clark said it appeared as if the worst of the recession is over, but the recovery remains fragile.
“There is a lot to be optimistic about in the Scottish economy in 2014,” Clark said. “However, government must ensure that businesses feel confident to invest and that will mean continuing to prioritise access to finance and also committing to future mitigation of fixed costs such as business rates.”
The Chambers’ survey comes a day after official estimates pegged Scottish economic growth at 0.7 per cent for the third quarter, slightly behind 0.8 per cent for the UK as a whole. Scotland’s construction, services and manufacturing sectors all performed strongly between July and September, with the former two expanding by 0.7 per cent. Manufacturing was close behind at 0.6 per cent.
The Scottish economy has now been growing for 18 months, with gross domestic product figures on the rise for the past six consecutive quarters.
Further gains are expected when official figures for the final quarter of 2013 are published in April, but there have been suggestions that the pace of growth may be slowing.
The Bank of Scotland purchasing managers’ index (PMI) released earlier this week found December’s rise in business activity to be the weakest reported since May.
The latest survey found optimism in the manufacturing sector at its highest since 2006, with orders rising for the fourth consecutive quarter.
Construction orders rose at the fastest rate for seven years, and retailers reported the highest rise in sales since 2006.
Confidence among hoteliers hit its highest point for a decade following a strong end to 2013.
“Though expectations for the beginning of 2014 are modest, occupancy levels are higher than they were a year ago and bar and restaurant trade is improving,” Clark said.
“Overall, tourism optimism is at an eight-year high and – with iconic events such as the Ryder Cup, Commonwealth Games and MTV Europe Music Awards coming to Scotland this year – there is every opportunity to succeed and to ensure that the legacy is fully realised.”
Clark also highlighted the recovery in the construction sector, which was particularly hard-hit during the downturn.
Demand improved in the final quarter despite a negative net trend in public sector work, and there are continuing concerns about public sector orders for the first three months of this year.