Scottish business recovery ‘on knife-edge’

ECONOMIC activity in Scotland ­remains touch-and-go, with markets such as tourism and retail fragile amid weak levels of demand.

Sectors such as tourism have continued to underperform. Picture: Ian Rutherford

New figures out today from the Scottish Chambers of Commerce (SCC) reveal muted signs of improvement, including a rise in confidence among manufacturers and a less-downbeat ­outlook in the construction sector.

The overall picture remains uncertain, though, with both consumers and businesses reluctant to spend.

The group’s latest quarterly business survey – conducted for the SCC by Strathclyde University’s Fraser of ­Allander Institute – highlights the ­domestic frailties that have led the Confederation of British Industry (CBI) today to call for more government assistance to boost exports.

Official data on Tuesday confirmed a widening of the UK trade deficit to £3.6 billion in February, the largest gap recorded for the past six months. In a new report, The Only Way is Exports, the CBI sets out 11 recommendations to restore global trade as a bedrock of UK economic strength.

These include easing access to export finance schemes by small and medium-sized enterprises, as well as new tax credits to encourage more small businesses to sell abroad. Such moves would underpin an export-led ­recovery, the CBI says.

Latest Scottish figures show a slight rise in the value of the country’s manufactured exports, even though volumes remain about 10 per cent below their pre-recession level. Commenting on the SCC survey, Garry Clark – the group’s head of policy and public affairs – said overall economic trends in Scotland were largely unchanged from a year ago. Five years on from the start of the “Great Recession”, there remains no substantial sense of a real recovery.

“Our latest survey paints a picture of continued fragility in the Scottish economy, with weak levels of domestic and consumer demand,” Clark said. “As we warned at the beginning of this year, there are clear signs the economy is continuing to bump along a path of little or no growth and further action may be required to stimulate demand.”

His conclusions back up findings from last week’s Scotland business monitor from Lloyds TSB, which pinned the country’s lack of growth upon weak demand amid the continuing threat of fall-out from the eurozone.

Experts remain uncertain as to whether the wider UK economy will slip into its third recession in five years, with mixed evidence on various fronts.

Despite the widening trade gap, the influential Organisation for Economic Co-operation and Development (OECD) has predicted that the United Kingdom will recover to its long-term growth rate of about 2 per cent later this year as activity picks up in most industrialised countries.

This, together with a 1.9 per cent rise in the value of UK retail sales during March, has tilted the odds slightly against a fall into triple-dip recession. Scottish retail sales have continually lagged the UK growth rate, with figures for March due later this month.

Meanwhile, Fraser of Allander has predicted that the Scots economy will grow by just 0.9 per cent this year as government cut-backs take full effect.

Clark said there were some positives to take out of today’s survey from the SCC, such as an unexpected upturn in confidence across the tourism sector.

However, lower demand remains the main constraint for the majority of firms, with most estimating that ­demand will remain static in the ­second quarter.