Scotland 'most likely' still in recession finds Lloyds survey

Published on Wednesday 31 March 2010 21:14

HOPES that Scotland will have emerged from recession along with the rest of the UK have been dashed as a new report reveals that a fragile recovery among Scottish firms has gone into reverse since the New Year.

• Scotland's weather conditions over the long winter may be linked to the economic downturn. Picture: Ian Georgeson

Businesses in Scotland have reported a "significant" deterioration in trading in the quarter to 28 February turning around four consecutive quarters of improvement.

While figures from the Office for National Statistics this week showed the UK economy pulled out of recession more strongly than originally thought in the last quarter of 2009, Scotland is likely to have remained in a worsening negative growth cycle well into 2010.

These new figures from the quarterly Lloyds TSB Business Monitor suggest it is less likely that Scotland will have emerged from recession along with the UK when the ONS unveils delayed statistics on the performance of the Scottish economy in the last quarter of 2009 in April.

Professor Donald MacRae, chief economist of Lloyds Banking Group Scotland, said: "Hopes were high for a definite exit from recession and a vigorous recovery. However, this latest quarter shows a setback."

Lloyds found 47 per cent of firms reported a decrease in turnover and 28 per cent a static turnover, giving a net balance of -22 per cent. The bank said this was a significant fall from the previous quarter's figure of -8 per cent and equal to the -22 per cent of the same quarter last year.

MacRae was unable to say if the downturn was due to Scotland's severe winter weather or a sign of something worse.

"It is unclear whether this is a one-off weather induced effect or a more persistent slowdown," said MacRae.

But the survey also showed Scottish businesses were optimistic about prospects for the next two quarters.

Lloyds said there was an increase in the number of those surveyed that expect an increase in turnover in the next six months to the end of August. The monitor's index showed a positive result at +2 per cent, equalling the figure for the last quarter and distinctly up on the -28 per cent of the same quarter one year ago.

MacRae said this was a sign that Scotland's economic recovery might be "delayed rather than terminated".

Expectations for an increase in export activity in 2010 are also high, with a net balance of +15 per cent of firms anticipating an increase in export levels. Lloyds hailed this as "the most positive result in an otherwise downbeat Business Monitor". "Realising these expectations for a rise in export activity is crucial to the Scottish economy returning to growth," said Lloyds.

Liz Cameron, chief executive of the Scottish Chambers of Commerce said: "We have long maintained recovery will be a long slow climb in Scotland. There is no doubt that the severe winter weather has a had a huge negative effect on both demand and supply. Conversely strong foundations are being laid for new world-class business in areas such as offshore renewable energy."