Scotland’s economy ‘stagnant’, according to new survey

SCOTLAND’S economy remains mired in “stagnation” according to a new survey of firms, which discovered that four out of ten businesses reported a drop off in turnover at the end of last year.

The Lloyds TSB Scotland Business Monitor found that, over the three months to November last year, only 29 per cent of companies reported an increase in activity. A total of 32 per cent said there had been no change, while 39 per cent declared they had seen a decrease.

Looking ahead into the first half of 2013, the survey found that half of firms expect business to be static, with only 23 per cent working on the assumption of any growth.

But the prognosis is brighter than the view held by Scottish firms earlier last year, when confidence had slumped. Donald McRae, the chief economist at the bank, said last night: “The latest business monitor suggests the stagnation of the summer has continued.

The report is published today after a group of economists surveyed in the Financial Times yesterday showed a guarded assessment of country’s prospects in the coming 12 months.

Professor McRae said that crucial to any improvement would be a surge in confidence both among families and firms. “This in turn depends upon building on policy measures to contain the eurozone sovereign debt crisis and implementing policies to restore the eurozone and UK economies to growth,” he said.

One bright note in the Lloyds TSB survey was in future expectation on exports, with many firms now expecting a rise in activity over the coming months.

But the survey suggests that firms in the service industries are facing the toughest times, with a net balance for turn-over at the end of last year at minus 16 per cent.

Responding to the survey, a Scottish Government spokesman said: “While it is encouraging to see such a significant improvement in firms’ expectations for future export activity, we recognise that Scottish businesses face a challenging economic environment.”

He added: “The Scottish Government recognises that more needs to be done to stimulate the economy. That is why our draft budget outlines further investment in construction, skills and the green economy. Last month the finance secretary also announced additional funding for construction projects worth a total of £205 million.”

Last week, the Institute of Directors in Scotland used a New Year message to warn that there was still a “long way to go” before the Scottish economy returned to health. It also urged politicians to switch their focus from independence to helping enterprise and job creation.

Meanwhile, the most recent update from the Fraser of Allander Institute at Strathclyde University has suggested that overall growth in Scotland this year could be around 1.3 per cent, slightly higher than the 1.1 per cent expected for the UK as a whole.