Scots economy gets boost with private sector rise

Donald MacRae: Figures are evidence of Scots recovery. Picture: complimentary

Hundreds of jobs are being created as business activity increases at its fastest pace in more than six years, according to a key report published today.

However, economists have warned that export trade remains weak, while the troubles afflicting Scotland’s construction industry are laid bare in a separate survey released today.

According to the Bank of Scotland’s latest purchasing managers’ index (PMI), the country’s private sector enjoyed a growth surge at the end of the second quarter.

A marked increase in business activity and new orders led firms to raise their headcounts as backlogs of work built up for the first time in close to two years. During June, the rate of job creation hit a 14-month high.

Last month’s figures also show that Scotland’s output expanded slightly faster in comparison with the rest of the UK. This growth was broad, with both factory output and service sector activity rising significantly.

The BoS report, compiled by research outfit Markit, is one of the most detailed examinations of economic output north of the Border, although it does not factor in the public sector.

Most experts believe that the Scottish economy remained within growth territory in the first quarter of 2013 after expanding by 0.5 per cent during the final three months of 2012. Today’s findings point to that pattern continuing into the second quarter.

Donald MacRae, chief economist at the Bank of Scotland, said: “June’s PMI rose to the highest level since May 2007, signalling a sharp acceleration in growth of the private sector.

“Both the services and manufacturing sectors recorded rising activity and output, accompanied by growth in employment. This growth spurt is domestic-based with new export orders out with the UK falling for the second successive month.

“Nevertheless, these results provide more welcome evidence of the growing strength of the recovery in the Scottish economy.”

The report’s headline activity barometer rose to 57 in June from a reading of 54.5 in May. Any reading above 50 denotes expansion. Some 600 companies across the manufacturing and service sectors were polled by the bank.

The Scottish Government’s enterprise minister, Fergus Ewing, said: “These welcome figures show continued strengthening in private sector output in Scotland, which has expanded for the ninth consecutive month and has reached the highest level since 2007.”

But, in a stark reminder of the challenges still being faced by Scotland’s construction sector, domestic firms have reported a further decline in workloads.

The downturn comes as builders elsewhere in the UK enjoy the first upturn in business since the economic slump began in 2007, according to the latest research from the Federation of Master Builders.

Scottish director Grahame Barn said: “These figures are worrying for Scottish builders. While the recovery seems to be picking up in other parts of the UK, it looks to have stalled in Scotland.”