Scotland’s Economy back to pre-recession level

John Swinney says the Scottish Government welcomes the news. Picture: Dan Phillips

The latest quarterly Bank of Scotland Business Monitor showed the best results for six years.

Donald MacRae, the bank’s chief economist, said if the surge in economic activity experienced over the summer continued, “the Scottish economy should record a year of growth for 2013”.

There was a “substantial improvement” in turnover, according to the research, with 45% of firms surveyed reporting it had risen over the period of June to August this year while just 22% experienced a decline.

Subtracting the firms who had a fall in turnover from those who had a rise, this gives a net balance of +23% - up from -8% in the previous three months and the best results for six years, returning the total for this to the pre-recession levels of 2007.

For firms in the production sector, the net balance for turnover for the three months to the end of August was +24%, compared to -5% in the previous quarter. The service sector also saw a similar improvement, with the net balance for turnover going from -10% to +22% in June to August.

Negative trend

Of the firms surveyed, 45% said their total volume of business was up in June to August, with 21% reporting a drop. Four out of 10 businesses surveyed said they saw an increase in the volume of new business and a quarter of companies experienced a rise in volume of repeat business.

But more firms suffered a fall in export activity than experienced a rise in overseas sales. Export activity rose for 22% of companies surveyed, but decreased for 23% giving a net balance of -1%.

This, however, was the only negative trend in this latest survey.

A total of 32% of firms surveyed said they expected their volume of business to rise in the next six months, compared to 13% who expect it to fall.

While just over half (53%) of firms expect turnover to remain static in the next six months, a third expect their turnover to rise, while 14% are anticipating a fall.

Mr MacRae said: “The tentative rise in confidence identified in the previous Business Monitor has been realised with achievement in summer this year of the best quarter’s results since 2007.

Investment

“The summer months have seen a surge in economic activity to pre-recession levels accompanied by rising business expectations for the remainder of the year. If it continues through to December, the Scottish economy should record a year of growth in 2013. Consolidation of the recovery would be enhanced by firms increasing investment.”

Finance Secretary John Swinney said: “The Scottish Government welcomes these figures, which show that the Scottish economy continued to strengthen over the three months to August 2013.

“The Business Monitor showed an improvement in firms reporting a rise in the volume of business, for both the production and services sectors. Also, the balance of firms reporting an increase in turnover over the quarter was at its highest level since 2007. The improvement was reported by firms in the production sector as well as in the service sector and follows the Bank of Scotland’s PMI for August, in which firms reported a record expansion in business activity.

Action

“These positive results follow recent labour market and GDP figures which show Scotland is outperforming the UK in terms of employment and growth. Youth employment figures also continue to outperform the UK. Against a backdrop of continuing economic challenges, the Scottish Government is taking action where we can, and we are seeing results, but there is much more that we could be doing with the economic and fiscal powers of independence to strengthen our economy and create jobs.”

Labour finance spokesman Iain Gray said his party welcomed “good news about the Scottish economy and increases in turnover, recruitment and growth are all good signs”.

But he added: “We have a duty to look beyond the headline figures to ensure everyone benefits from this recovery. Even this positive report has elements which show how fragile the economic recovery is. What we need is a Scottish Government that is focused on securing that recovery and making sure that everyone in Scotland benefits. Instead we have a Scottish Government that is entirely focused on the referendum and that’s the wrong priority.

“A recovery built on zero-hour contracts and temporary jobs will not bring about the long-term, sustainable growth that allows us to create the kind of Scotland we aspire to. Too many Scots are still missing out on the opportunities they deserve.”