Scotland's economy: weak pound boosts tourism and exports
The weakness of sterling in the aftermath of the Brexit vote saw Scottish exports rise for the first time in two years in the three months to June, a report out today reveals.
The weak pound also buoyed the country’s tourism sector, boosting visitor numbers, says the Royal Bank of Scotland Scottish Business Monitor, produced by the Fraser of Allander Institute.
However, on the downside, the report says capital investment continues to fall and is “likely to do so for the rest of the year”, suggesting business confidence overall remains fragile.
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Cost pressures, exacerbated by the weakness of sterling since the Brexit vote in June last year, also “remain strong, suggesting higher consumer price inflation to come”, the Scottish Business Monitor adds.
The survey of more than 400 businesses reveals that more than a quarter (27 per cent) of companies saw export activity rise in the three months to June.
That compared with less than one in five (18 per cent) who reported a fall. The balance of +9 per cent compares with a flat first quarter to the year and a balance of -16 per cent during the final quarter of 2016 – and 11 per cent in Q3 – making this the first positive news on Scottish exports in two years.
Professor Graeme Roy, director of the Fraser of Allander Institute, said: “These latest figures indicate that Scottish businesses are remaining resilient in the face of challenging trading conditions.
“Businesses reported a further improvement in activity, although levels of growth remain relatively fragile.
“Inflationary pressures are an increasing concern but the fall in the value of sterling is providing a welcome boost for Scotland’s tourism sector and exporters.”
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The production sector led the way on export activity, with 21 per cent reporting an increase. Services, ranging from finance to retail, was more muted, with a positive balance of +3 per cent.
Businesses are optimistic that the trend will continue, with a net 6 per cent expecting export activity to rise over the remainder of 2017.
New business continued on the upward trend first reported in the second half of last year. A third of firms stated that the volume of new business rose in the three months to June, compared with one in four who said it fell.
The balance of 9 per cent is an improvement of +3 per cent on Q4 2016 but a drop of 1 per cent from Q1 2017.
Capital investment continues to decline. One in five firms reported that new capital investment rose in the three months to June. More than one in four (27 per cent) said that it declined.
Stephen Boyle, RBS chief economist, said: “Prompted by the weaker pound and stronger growth in the euro, the return of export growth is welcome but falling business investment is a concern for longer-term growth prospects.”