Oil and gas slump takes toll on economy

Alasdair Gardner: Challenging months ahead. Picture: TSPL
Alasdair Gardner: Challenging months ahead. Picture: TSPL
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Oil and gas firms experienced a drop in orders last month with the slump hitting the wider private sector economy in Scotland.

Bank of Scotland’s latest purchasing managers’ index (PMI) – published today – reveals that overall output levels deteriorated for the first time in three months during February.

New work received by private sector businesses contracted, ending 11 months of growth, and manufacturers reported a “substantial” decline, according to report. Workforce numbers continued to slide but the rate has eased since January.

The seasonally adjusted headline PMI – a single-figure measure of the month-on-month change in combined manufacturing and services output – scored 49.2 in February, down from 50.3 in January. Any reading below 50 denotes contraction.

Alasdair Gardner, Bank of Scotland regional managing director for commercial banking, said: “The downturns in the Aberdeen region and the oil and gas sector negatively impacted the Scottish economy during February as firms struggled to cope with lower incoming new-order levels and deteriorating volumes of incomplete work.

“The drop in business activity and the slide in workforce numbers also signals a challenging few months ahead for the region.”

Service sector firms reported a contraction in activity – the first recorded decline since September. Goods producers registered a drop in output, reflecting a combination of reduced new orders and greater competition in the sector.