Port of Grangemouth: exports improving
Scottish exporters are making some gains from the weak pound, although the benefits are being offset by rising import costs and weak capital investment.
The latest Royal Bank of Scotland Business Monitor, conducted by the Fraser of Allander Institute, shows more firms (27%) expecting a rise in exports in the last three months against 18% expecting a fall. This is the best balance for two years.
Business volumes are expected to increase but growth remains fragile and patchy across the country, it said.
A net balance of 12% in the North East provides further evidence that the “prolonged hangover in the region since 2014’s oil price collapse is coming to an end”.
However, another survey by the Centre for Economics and Business Research points to UK growth sinking to its lowest levels since the financial crash in 2008.
It predicts UK growth will be just 1.3% in 2017, a downward revision from an earlier forecast of 1.7%. The forecast for 2018 has also been revised down from 1.6% to 1.2% in the face of “political uncertainty”, lower business investment because of Brexit and weaker consumer spending.
GDP figures due on Wednesday will show whether Scotland entered a recession, defined as two consecutive quarters of negative growth.
Commenting on the RBS monitor, RBS chief economist Stephen Boyle said: “Scotland’s economy continued to grow in the second quarter, albeit very modestly.
“More encouraging is the outlook, with a greater proportion of businesses expecting higher levels of activity in the second half of the year.
“Inflationary pressures remain strong and, with wage growth weak, households will be under pressure; consumer-facing sectors will see a further weakening in demand.
“Prompted by the weaker pound and stronger growth in the euro area, the return of export growth is welcome but falling business investment is a concern for longer-term growth prospects.”
Professor Graeme Roy, Director of the Fraser of Allander Institute, added: “Scottish businesses are remaining resilient in the face of challenging trading conditions.
“Inflationary pressures are an increasing concern but the fall in the value of sterling is providing a welcome boost for Scotland’s tourism sector and exporters.”
Economy Secretary Keith Brown described the report as “good news for the Scottish economy”.
He said: “The latest RBS business monitor prepared by Fraser of Allander contains good news for the Scottish economy.
“Companies across the country have reported modest growth in the three months to February, with the financial and business services and tourism sectors enjoying above average growth. Most companies also enjoyed increases in turnover and new orders.
“Businesses are optimistic that the trend will continue, with many expecting export activity to also rise over the rest of 2017.
“These encouraging economic signs mean it is more important than ever that we avoid an extreme Brexit, which threatens jobs, investment and living standards – and the Scottish Government will continue to do all we can to retain our place in the world’s biggest single market.”