Light from private sector suggests Scottish economy holding its own

Scotland’s private sector continued to expand in the closing weeks of 2011 with the first rise in new business for four months, keeping economic growth hopes alive.

The number of jobs created by private businesses also went up, though at a “modest pace”, according to Bank of Scotland’s purchasing managers’ index (PMI) for December.

Today’s report shows that output grew for the 12th month running, pushing the headline index reading up to 51.2 from 51.1 in November. However, overall growth was still down on the UK-wide average. Any reading above 50 denotes expansion.

Donald MacRae, Bank of Scotland’s chief economist, said: “The PMI has been positive (above 50) for all 12 months of 2011, indicating growth in the private sector of the Scottish economy.

“However, the last four months have seen a slowdown, with December’s result just positive at 51.2.

“A pick-up in the services sector at the end of last year has compensated for falling output and export orders from a manufacturing sector suffering from the slowing of the eurozone economies,” he noted. “The increase in new business for the first time in four months is very welcome and suggests the Scottish economy, while struggling to grow, is avoiding a fall in output.”

The Bank of Scotland PMI is produced by research firm Markit and features survey data from some 600 companies based in Scotland and operating in the manufacturing and service sectors.

It also found that cost inflation fell slightly last month and was the lowest for 12 months.

On the employment front, headcounts grew at a slower pace in the manufacturing sector, which saw the weakest rate of job creation since June. Employment within the UK-wide private sector economy remained broadly unchanged in December.

A Scottish Government spokesman said: “It’s encouraging that Scottish private sector output increased further in December and that we are seeing the first rise in new business for four months.

“The government will continue to do everything in our current powers to strengthen the recovery. We are also doing all we can to support small businesses through our comprehensive relief package worth over £500 million a year.”

At the end of October, the Scottish Chambers of Commerce (SCC) warned that Scotland’s fragile economic recovery had “stalled” and argued that governments north and south of the Border needed to focus on exports, housing and transport to revive its fortunes.

Its quarterly economic report, compiled with Strathclyde University’s Fraser of Allander Institute, noted that business confidence had taken a battering during the previous three months due to weak consumer spending and the deepening eurozone debt crisis. The SCC’s latest survey is due shortly.

l Reported fraud in Scotland has soared to £105m in the last 12 months, compared to £22m in 2010, according to BDO’s annual “fraud track report”, released today. However, the latest total was skewed by a single £91m fishing fraud case. Across the UK, the value of reported fraud exceeded £2 billion, up almost 50 per cent on a year earlier.

Judith Scott, forensic director at BDO in Glasgow, said: “Although the increase in reported fraud across the UK is worrying, it is not surprising. We are witnessing frauds that are increasing in complexity and sophistication, and businesses must continue remain vigilant.”