AFTER THE ELECTION…THE GATHERING ECONOMIC STORM

BILL JAMIESON

Confirmation – should any be needed – that the economy in Scotland is on a downward turn came this week with news from bakery chain Greggs that sales growth has slowed.

Scotland’s iconic fast food chain said in a trading update yesterday that growth in like-for-like sales slowed from six per cent this time last year to 3.7 per cent in the first 18 weeks of 2016.

There were signs of a recovery in recent weeks. But Scotland’s new intake of MSPs will have plenty to chew on other than their new Scottish parliament pencils as evidence piles up of a gathering slowdown across the economy.

The Bank of Scotland’s purchasing managers index out yesterday showed private sector firms slowed recruitment last month to the lowest level for more than five years.

The PMI measures changes in manufacturing and services output. It rose to 50 in April after registering 48.5 in March, suggesting there was neither growth nor contraction.

However, firms reported an increase in work backlogs, indicating slack demand and spare capacity, while manufacturers reported the eighth consecutive month of new orders in decline.

The findings are echoed by a separate survey showing Scottish businesses’ hiring intentions have fallen sharply to levels last seen in 2014.

The latest Business Trends Report by accountants and business advisers BDO LLP shows that the employment index, which tracks firms’ intentions to hire in the coming six months, has dropped from 104.8 to 102.2 (the equivalent year on year figure was 112.0 in April 2015).

While still above the long term trend, this is the biggest monthly drop in the growth of employment since the aftermath of the financial crisis.

Firms in Scotland appear to be increasingly shunning new hires as the National Living Wage makes employment more expensive. BDO says some firms may also be holding off until uncertainty about future membership of the EU is resolved.

But signs of an economic slowdown were already evident before the referendum date was even announced.

BDO’s Output Index – which reflects companies’ experience of orders for the coming three months – at 100.6 is down from 101.3 in March and down from 104.3 in April last year.

And other evidence points to a continuing slowdown in activity and business. Car sales stalled in Scotland last month as the market “cooled off” across all regions, according to motor traders.

Figures from the Society of Motor Manufacturers and Traders showed 14,619 sales were registered in April – more than five per cent lower than the same period last year.

And further evidence has emerged of a slow-down in UK house prices in April, as the Halifax said growth eased to 9.2 per cent compared to last year. A month ago, the Halifax said house prices were rising by 10.1%.

Meanwhile administrators have revised upwards the number of job losses in Aberdeen following the collapse of offshore oil services firm Harkand Group.

Accountants Deloitte said 148 posts would go out of a total of 171 UK redundancies announced on Thursday. The business advisory firm had initially estimated 98 job losses north of the border.

Harkand went into administration after being hit by the prolonged fall in global oil prices. Ten companies within the London-headquartered group were affected.

Seldom has the disconnect between the concerns of MSPs and developments in real world Scotland been wider.

The economy was barely mentioned in the election campaign.

While the Conservatives did well to beat Labour into second place and become the official opposition to a minority-government SNP, it would be premature to assume that politics in Scotland have taken a rightward turn.

The Left-leaning and Independence supporting Greens now have six MSPs. Together with the five Liberal Democrat MSPs they are likely to align themselves with the more radical elements within the SNP, particularly those sympathetic to land reform.

Blue may be the colour of the official opposition. But the likely prevailing forces in the parliament remain distinctly Red. Confirmation this summer of a further slowdown and rising unemployment should make for a fretful and disputatious parliamentary session.

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  Comments: 3


  1. “Scotland’s iconic fast food chain”

    Gregg’s is from the North-East of England if I am not mistaken? I don’t think it is a Scottish chain, although it will employ a lot of people here.

    David

  2. William Frame


    Bill this great piece has to be compulsory reading for all MSPs and their spads!
    The economy has to be top of the agenda, without steady growth and confidence we are in deep deep trouble as a Nation.

  3. Malcolm Parkin


    Scotland is a no-can-do country across the board, and has always been known as such. Since the advent of the SNP it has largely lived on a diet of resentment and blame, when it’s own inadequacy is the root problem.
    Virtually none of the Scottish MSPs has any business experience or any grasp of the relationship between income and expenditure, many seeming to think that money grows on trees.
    All the parties are doing is quarrelling about the division of an ever-diminishing cake, and it is going to take a leader of strength to encourage business to come here, and for existing business to invest for growth.
    For as long as Ms Sturgeon’s griping neverendum persists, this will not happen.
    Indeed, many businesses are quietly arranging to transfer their legal presence to England. Northumberland is not far away.
    And there is no way the big earners are going to stay if taxes are increased.
    This inward looking negativity and defensiveness is a feature of Scotland, and is now so much in your face it has become downright depressing and very off-putting for economic development.

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