Beware of the property price trends barometer

THERE are signs of a tentative upturn in the economy. Survey after survey (including BDO’s own monthly Business Trends survey), have increased confidence among business owners, and a view that the worst is over and that we are heading toward some semblance of recovery.

House prices have begun to rebound. Picture: Robert Perry

There are undoubtedly grounds for optimism. Orders are increasing, output is raised, and businesses are, if not booming, certainly getting better. All of this is good and welcome news, but a note of caution must be expressed. The danger is that, after so many years of economic gloom, we jump on any upturn with too much enthusiasm.

The situation is improving, the marketplace is strengthening, and business is better but from a very low base. It will be better to improve slowly and steadily rather than quickly and uncontrollably. There is genuine fear that house price rises are, again, being seen as one of the main barometers of economic improvement.

House price rises do make people feel better. They are largely illusory. Concerns are increasing that we may be facing another property bubble founded on cheap money and optimistic forecasts for price growth. I don’t believe that this is the way to rebuild the economy.

What we need is adequate and appropriate financing for businesses with good management, excellent products and services, and sound financial projections. We need a planning system that is alert to the need for growth whilst also taking account of the long-term impact of new developments. We need transport infrastructure which can support and enhance existing and future growth.

We need to encourage entrepreneurs who want to create wealth and employment in Scotland and keep it here. We need to build a strong economy able to withstand the changing financial pressures of a global economy. We need to play to our strengths in oil and gas, food and drink, hospitality, manufacturing, and services and support these sectors.

Positive surveys and reports are helpful but, on the back of this optimism, we need to ensure that we are building a secure, well financed, and well managed private sector able to take Scotland forward as the economy improves.

• Martin Gill is a partner and the head of accountants and business advisers BDO LLP in Scotland.

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