Signs of twin track recovery fuel calls for further action

Liz Cameron: Clear divide between manufacturing and service sectors
Liz Cameron: Clear divide between manufacturing and service sectors
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BUSINESS leaders today called for further measures to sustain the economic recovery amid a “clear divide” between the fortunes of Scotland’s manufacturing and service sectors.

The plea came as a poll of about 8,000 companies across the UK pointed to “encouraging” signs of growth.

However, in its quarterly economic survey, the British Chambers of Commerce (BCC) also warns that the pace of recovery is still too slow. Many measures of activity remain below pre-recession levels, it notes, while business cashflows are weak.

A geographic breakdown of the data suggests a twin-track recovery north of the Border.

Within manufacturing, domestic and export sales are up on previous surveys, with both measures higher than the UK average. Service sector businesses, on the other hand, appear to be struggling. Today’s report highlights a fall in domestic sales and a slump in employment expectations among such firms, which include hotels, restaurants and retailers.

Liz Cameron, chief executive of the Scottish Chambers of Commerce (SCC), said: “This latest survey reveals a clear divide in Scotland between the fortunes of our manufacturing and service sectors.

“What is clear is that our economy is not yet out of the woods. Governments at a UK and Scottish level have responded positively to business demands for a greater focus on capital spending over the past year, but it is clear that additional shorter-term solutions may be required in the light of this year’s expected shallow levels of growth.”

The SCC is due to publish its own business survey, spanning the same opening three months of the year, on 12 April. In January, it warned that the “fragile” recovery seen in the first half of last year had waned in the final six months of 2011 – and was likely to get worse in 2012.

The BCC said it expected the UK economy to expand by just 0.6 per cent this year. Its forecast comes amid rising oil and food prices, which mean that inflation will fall less quickly than previously thought, while the eurozone debt crisis continues to hit confidence.

The group said the UK government needed to take “radical” steps to set businesses free, including creating a state-backed bank to boost lending to SMEs.

Today’s survey comes a day after the monthly purchasing managers’ index showed manufacturing activity had expanded at its fastest pace in ten months in March, driven by a pick-up in new orders and increasing the likelihood that the UK economy grew in the first three months of 2012, avoiding a recession.