Scottish business optimism and output hits three year low

The CBI said there were positive signs for the manufacturing sector. Picture: John Devlin

The CBI said there were positive signs for the manufacturing sector. Picture: John Devlin

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Business optimism and output have fallen to a three-year low in Scotland, according to a new report.

Employers’ hiring intentions are also at a two-year low, the June business trends report by accountants and advisers BDO LLP found.

Report authors said that while uncertainty created by the UK’s EU referendum vote had disrupted investment, the figures have been in decline for a year “indicating more deep-rooted problems with the economy”.

BDO said business output, which reflects companies’ experience of orders for the three months ahead, now sits at 99, down from 104.1 in June last year.

Business optimism, which predicts growth six months ahead, fell to 98.9 from 103.9 in the same period last year.

Meanwhile, the report found that uncertainty has contributed to the slowing rate of job creation.

BDO’s employment index, which looks at firms’ intentions to hire, has now dropped to 101.4 from 109.1 a year ago.

Martin Gill, the Scottish head of BDO LLP, said: “There is little doubt that uncertainty prompted by Brexit has resulted in disrupted investment in the Scottish economy, but the signs of a slowdown were already showing ahead of the decision.

“The latest output and optimism figures are down considerably on June 2015 when the EU referendum wasn’t even on the agenda.

“The issue for business, therefore, is that the Scottish, and UK economies, were already facing difficulties even without the Brexit vote.

“These difficulties have, in all likelihood, been compounded by the vote leaving the economy in a very fragile state indeed.

“Of course negativity breeds negativity and businesses need to keep their heads and understand that while the situation at the moment is unclear, they are unlikely to notice any difference in their day-to-day operations for some considerable time to come. “

BDO has suggested three steps which could be taken by government to “stabilise” the economy in the wake of the Brexit vote.

They are: encouraging prosperity in the manufacturing regions; acting to solve the “productivity puzzle” which means that the growing workforce is not increasing productivity; and injecting more cash into the economy to lower borrowing costs further and encourage businesses to invest.

Mr Gill added: “Continued investment is essential as is growth if the Scottish economy is to come through this relatively unscathed. We are at a crucial moment where we must be sensible in protecting the UK economy. We need a plan of action now that gives businesses the added confidence to progress with investment plans.”

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