Early signs of Brexit bounce as..

Oil slump impact greater on Scotland than UK

Port of Grangemouth
Port of Grangemouth

Data from two surveys today show that the slump in the oil price is having a greater impact on Scottish business than the UK as a whole.

While the broader UK economy shows a degree of resilience to the post-Brexit decision, output and new orders fell across Scotland’s manufacturing and service sectors for the second consecutive month.

Outstanding business levels among private sector companies were also down, according to the latest purchasing managers index data produced by Bank of Scotland.

There was better news for jobs and selling prices, with firms boosting their workforce numbers at the fastest rate for 17 months, and putting their prices up to a 25-month high in August.

Service providers said the downturn in the oil and gas sector continued to have a downward impact on the economy and was the cause of a modest decline in their business activity. Production rose slightly according to manufacturers.

Average cost burdens faced by Scotland’s private sector continued to increase. The rate of inflation also quickened to a four-month high with some evidence that the rise reflected higher import costs.

A separate survey from BDO showed an upturn in confidence after it fell to a three-year low in July.

Its Business Trends Report was more in keeping with UK surveys, indicating that Scottish businesses are now finding that the post-Brexit slump has not been as severe as expected.

Even so, it reported falling output and static employment and the data showed that the impact of the oil slump was having a greater effect on Scottish business than across the whole of the UK.

Martin Gill, Head of BDO in Scotland, said: “After the immediate Brexit scare, businesses appear to be gaining confidence in Scotland and have found that, for most of us, it’s back to business as usual.

“The Brexit decision was always going to produce winners and losers and it is clear that for some businesses it has been a boon – exporters for example – but for others there remains considerable uncertainty.

“However, it is clear that there remain issues with the Scottish economy which predate the Brexit vote and there are concerns that long term uncertainty over the Scotland’s and the UK’s role in Europe is likely to dent business confidence further in the future.

“Scotland has wider economic issues over the continuing financial difficulties in the North Sea and its impact on the economy of the North East and further afield. This bounce in confidence is welcome and indicates that Brexit can offer opportunity for many businesses.

“However, I do believe that uncertainty means that the respective governments at Holyrood and Westminster must prioritise taking advantage of cheap borrowing costs to invest in infrastructure and protect the growth of our economy as we move closer to exit negotiations.”

  • The British Chambers of Commerce (BCC) has slashed its growth forecast for the UK following the Brexit vote.

It now expects the UK to grow by 1.8% this year, against its March estimate of 2.2%, and by 1% in 2017 compared to an earlier forecast of 2.3%.

Uncertainty surrounding the UK’s negotiations over its withdrawal from the EU would “dampen growth prospects”, it said, adding that consumer spending will weaken.

Even so, it expects the UK to avoid recession.

  • An international study published today by specialist global insurer Hiscox reveals a third year of solid growth for small businesses but widespread dissatisfaction with governments over what is seen as a lack of support for SMEs.

    Just 28% of small business owners and managers consider their government supportive of entrepreneurs. The lowest figure is in France (14%) while in the UK it has fallen from 45% to 35% in the past year.

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