Output boost for Scotland signals hope of recovery

Published on Wednesday 21 October 2009 21:10

SCOTLAND'S economy has shown signs of returning to growth, with the strongest performance from manufacturers for 18 months.

According to the CBI, output and orders grew in the three months to October, and an even stronger increase is predicted over the next three months.

The findings were supported by a survey published today by the Scottish Chambers of Commerce showing evidence of a fragile recovery.

According to the latest Scottish Industrial Trends Survey published by CBI Scotland, total new orders rose for the first time since April 2008 with the rate of growth at its fastest since July 2006.

This reflected an improving trend in both domestic and export orders – the former rose for the first time in two years, while the latter were broadly flat after three quarters of strong declines.

The outlook for both orders and output is set to improve further in the current quarter, with faster growth predicted in both.

CBI Scotland director Iain McMillan said: "These results are encouraging and the best for 18 months, and provide further grounds for believing that the worst appears to be over for manufacturing industry in Scotland."

The latest Scottish Chambers of Commerce survey reveals that the widely anticipated "green shoots" have now taken root north of the Border, with clear signs of an emerging recovery in manufacturing – one of the biggest victims of the recession. Tourism also performed well during the summer, the survey found, while pessimism is easing in the retail sector.

However, the survey, which covers the three months from July to September, warns that the economy remains vulnerable as domestic demand is still weak and sectors such as construction continue to report "depressed" demand.

SCC chief executive Liz Cameron said: "This recovery remains fragile and is not evident in all sectors. While manufacturing was seeing a rise in optimism, domestic demand was weak and the recovery was being driven by exports."

The report reinforces yesterday's GDP figures, which provided reasonable cause for optimism but also gave rise to warnings that the Scottish economy is not yet out of the woods.

The strength of the bounce-back was questioned after GDP figures showed that the Scottish economy shrank for the fourth successive quarter between April and June. However, this pre-dates the upturn that some believe to have started in the summer.

Although the rate of decline slowed to 0.8 per cent from 2.5 per cent during the previous three months, the Scottish economy performed worse than the rest of the UK during the second quarter, the figures showed.

Finance secretary John Swinney said the GDP data showed there was no room for complacency. "We must continue to do all we can to position Scotland's economy for recovery," he said.

Grahame Smith, STUC general secretary, said next year's public-spending cuts and rising unemployment continued to cast a shadow over the recovery.

"It is entirely possible that growth could resume in quarter three but the STUC does not believe that a robust, sustainable and demand-led recovery is imminent," he said.