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Surveys point to confidence

Business back in growth mode as election uncertainty lifted

Scottish exportsBusinesses are showing a return to growth that is likely to pick up now that the uncertainty over the General Election has been lifted.

The latest Business Trends Report by accountants and business advisers BDO, and the Bank of Scotland purchasing managers index, show an uplift in activity.

BDO’s survey pointed to “strong confidence” among firms in Scotland and suggested businesses have been unruffled by the election campaign and eurozone uncertainty.

It also hinted at further good news to come. A rise in the BDO Output Index indicated that growth could speed up in the latter half of 2015 following a weaker start to the year.

However, BDO wants the new government to encourage investment by permanently increasing the annual investment allowance to £5 million and to consider a VAT zero rating of supplies to companies that export. The UK currently allows manufacturers to zero rate their exports, but not their suppliers.

Martin Gill, lead partner at BDO in Scotland, said: “Ahead of the 2010 election our data showed high levels of business confidence, much like this time around. However, this fell away not long after, and so to avoid this happening again, the new government needs to put firm actions in place to help businesses thrive.

“It is encouraging to see that businesses are feeling optimistic about the coming months in the hands of a new government, but the confidence that counts is the confidence that converts to businesses actually investing. Our new leaders must help with this by putting tangible measures in place that will encourage businesses to invest in training or research, technology and equipment to help improve productivity.

“The new government also has the opportunity to boost future economic growth by investing judiciously in our country’s infrastructure.I hope that they will take it.”

Bank of Scotland’s purchasing managers’ index for April indicated a return to growth of business activity, although the expansion was centred on the service sector as manufacturing registered a modest contraction.

The latest reading on the index was the best recorded by the survey so far this year and there was an improvement in employment.

Services activity returned to modest growth and companies reportedly benefited from increased marketing and a modest strengthening of market confidence compared to March.

However, manufacturers registered a fall in output for the second time this year because of a fall in orders. Lower foreign demand was mentioned as a factor pushing total new work lower. There were reports that a weak euro had undermined demand from clients based in the eurozone.

Donald MacRae, chief economist at Bank of Scotland, said: “April’s PMI signalled a return to growth in the Scottish economy. However, the expansion was marginal and confined to the services sector with manufacturing exporters suffering from the effects of low growth in the Eurozone.

“The slowdown of the first three months of this year is slowly being reversed with both employment and new business increasing in April suggesting a return to a more normal growth rate in the second quarter.”

A Scottish government spokesman said: “There is no doubt that the recovery in Scotland is progressing.”

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