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Pace of increase at seven month low

Economy ‘growing but slowing’ as caution takes hold

Donald MacRaeMore evidence emerged today that the pace of economic growth is slowing down as business owners worry about falling demand.

Owners of small firms fear consumer confidence is on the wane and are taking a more cautious view of the outlook for next year.

And recruitment agencies say that while job opportunities and wages continue to increase, they are doing so at a slower rate.

Donald MacRae (pictured), chief economist at Bank of Scotland, said its November Report on Jobs showed the pace of increase eased to its lowest level for seven months.

“Vacancies for permanent jobs, rose but at a slower rate than earlier in the year. These results indicate Scotland’s economy growing but slowing,” he said.

Scottish small business confidence has fallen for a second quarter and continues to track below the UK average, according to the Federation of Small Businesses’ (FSB).

While more Scottish small business owners are optimistic than pessimistic, the analysis shows that firms are much more cautious than earlier in the year. However, the data suggests more firms are planning investment for 2015 than they were at the same point in 2014.

The Scottish Small Business Index, the FSB’s measure of small business confidence, fell to +4.6 points in the final quarter of 2014, down 21 points from quarter three. The UK Index also fell by around 20 points this quarter, from +41.0 points to +17.6 points.

The headline Scottish statistic is based on research showing that, while 32% of Scottish firms expect their prospects to improve over the next three months, 25% expect them to deteriorate.

Fewer Scottish small businesses saw a growth in revenue this quarter than last, though an increasing proportion of firms are reporting rising profits. The Scottish analysis suggest that this uptick in profits is likely partially attributable to a fall in business cost inflation.

On a UK-wide basis, nearly a quarter (22%) of businesses highlight the cost of finance as a barrier to growth, compared to 10 per cent a year ago.

Andy Willox, the FSB’s Scottish policy convenor, said: “Scottish small business confidence has cooled rapidly in the second half of 2014. While more firms are producing plans to invest and reporting increased profits, our report highlights that four in 10 businesses fear subdued consumer demand could hamper their growth.

“Seasonality is a factor in these results but we can’t ignore that Scotland’s seems to be performing poorly in comparison to many English regions. While 2015 will undoubtedly offer many opportunities for Scottish small firms, policymakers need to focus on new ways to give more of them the best chance of success.”

The Index is based on a survey of 1,771 FSB members, 174 in Scotland, conducted between 3 and 14 November 2014.

Another survey published today on employees’ views of their bosses leadership skills shows less than half (49%) thought they had enough experience to manage a crisis.

Close to two-thirds (65%) said their managers were good at financial management, less than half (44.8%) thought they were innovative enough.

Almost (18%) thought their boss lacked people management skills, while 15% said their communication could be improved. Meanwhile one in ten thought their manager lacked empathy.

Professors Susan Murphy and Richard Harrison from University of Edinburgh Business School’s Centre for Strategic Leadership led the research. Professor Harrison said: “Judged on these results, Scotland’s workforce has a great deal of faith in its leaders which will come as good news for many organisations.

“However, it also shows the nation’s bosses have room for improvement when it comes to their responsiveness and creativity – with many identifying the need to gain experience outside the UK as a priority.

“With the challenges of leadership becoming more complex each and every day, our findings suggest Scottish managers could learn valuable lessons from their workforce to become more competitive and future-oriented in their approach.”

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