Scottish confidence on a high as recession concerns begin to ease

CONFIDENCE is growing among Scottish companies amid further evidence that a recession can be avoided, according to figures published today.

The Scottish Chambers of Commerce (SCC), representing thousands of firms across all sectors of the economy, said businesses had made a much better start to 2012 than last year, even though the recovery remains “tentative and uncertain”.

SCC’s latest quarterly survey points to stronger orders and sales in most areas, led by manufacturing and tourism. In the tourism industry, expectations for the year ahead are said to be at their highest level in four years.

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The report echoes other recent snapshots of the economy, including Monday’s purchasing managers’ index from Bank of Scotland, which revealed that output in March from the private sector had grown at its quickest rate in a year.

Economists believe that Scotland, and the wider UK economy, may have avoided falling back into recession during the opening three months of the year. An initial reading of first-quarter UK GDP is due on 25 April.

But the SCC, which conducted its research in conjunction with the University of Strathclyde’s Fraser of Allander Institute, said widespread difficulties remain for Scottish businesses.

Garry Clark, head of policy and public affairs at the Chambers, said there were fewer signs of recovery in construction, and that more central government support was necessary to bolster demand.

He also argued that more needed to be done to ensure rural and island businesses grow to become more competitive, as high transport costs could be affecting visitor numbers. “Our survey suggests that Scottish businesses have had a better start to 2012 than to last year, led by more positive indicators in manufacturing and tourism,” noted Clark.

“Businesses are now more confident as to the year ahead, but confidence varies between sectors and Scottish regions.

“The recovery remains tentative and uncertain and governments at both the UK and Scottish level need to act to support and encourage the recovery, and to recognise that a ‘one size fits all’ approach is not always appropriate and that specific measures may be required to ensure our rural and island businesses can grow and remain competitive.”

Despite the upbeat findings for tourism, two-thirds of companies operating in the sector reported that a lack of tourist demand was the primary business constraint. Poor transport infrastructure, high fuel costs and weak marketing also remained a concern to hotel operators. Clark said: “It may become more difficult for rural and island businesses to attract new customers.

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“On a wider level, it also underlines the need for the UK government to consider an extension of the 5 per cent VAT rate for tourist-related businesses and to devolve air passenger duty.”

The poorest performing sector in the first quarter was retail, where the “very low levels” of business confidence picked up only slightly.

Pressures on margins remained widespread, the SCC added, with more than half of those firms quizzed expecting declines in profits and turnover over the coming 12 months. Just 11 per cent reported increased sales in the quarter, and a mere 6 per cent are anticipating a rise as “continuing concerns over consumer confidence remain evident”.

Figures last month from the Scottish Retail Consortium showed high street sales north of the Border were the worst for the month of February since records began. Data covering March is due shortly and is likely to show some respite after March’s mini heatwave lifted demand for clothing and footwear, according to a report by the British Retail Consortium earlier this week.

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