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Optimism dipping

Slowdown in spending hitting confidence

Martin Gill BDOThe slowing services industry is taking its toll on the Scottish economy as firms delay spending decisions, according to the latest Business Trends Report by accountants and business advisers BDO.

Its latest report shows optimism falling sharply and now at its lowest in more than two years.

The gloomy figures tally with the services sector output index which has now fallen for five months running,

Recent figures have suggested that much of the caution is driven by firms feeling starved of investment, as uncertainty about the EU referendum is delaying spending decisions.

The picture looks worse for manufacturing. Its optimism sub-index is giving a strong indication that order books will decline sharply in the next six months if nothing changes.

BDO’s Inflation Index offers some hope for manufacturers, rising 0.1 to 96.8 in March. However, as commodity prices stay low, the minor increase is unlikely to be enough to give a much-needed boost to struggling sectors such as the steel industry.

Commenting on the findings, Martin Gill head of BDOin Scotland, said: “These figures show that political and economic uncertainty is affecting optimism among Scotland’s businesses.

“The EU referendum, the continued difficulties faced by the oil and gas sector, and the economic difficulties being faced in the Eurozone and China are all contributing to a mood of insecurity which is hitting investment and growth plans.

“Scotland’s slowing economy may be in need of additional support to protect its growth. Our latest figures echo those from the Scottish government which revealed growth of only 0.2% in the fourth quarter of last year which is clearly of great concern particularly as this is substantially lower than the rest of the UK.”

Given that the UK government can currently borrow at rates never seen before there may be a benefit in investing in public infrastructure projects. Expansion in roads, house and rail building programmes could reignite the manufacturing sector and be a boost to the wider economy.”

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