Main Menu

As I See It

Surveys are poor measure of real economy

Terry smiling headTwo business surveys are published today and not for the first time they give different interpretations of how companies view the immediate outlook.

According to BDO’s Business Trends report, UK businesses are more optimistic about 2018 following the progress in the Brexit talks at the end of last year.

“Business leaders are now more confident about the year ahead and are bolstering their recruitment efforts as a result,” declared Martin Gill, partner and head of BDO in Scotland.

However, Bank of Scotland gives a far less upbeat measure of the economic outlook. Its Business in Britain Report says Scottish businesses have the second lowest confidence rates in the country amid market uncertainty and concern over weak domestic demand. 

There is nothing much to look forward to in this report with business confidence in Scotland – calculated as an average of respondents’ expected sales, orders and profits over the next six months – down two points compared July 2017.

The Business in Britain report, now in its 26th year, gathers the views of more than 1,500 UK companies, who report continuing staff shortages and an increasingly cautious approach to pay.

This survey is deeply unsettling, not because of its gloomy tone, but because it is hard to believe there could be such discrepancy in views across the UK.

It says Scotland is the second least confident [economic] region after Yorkshire and Humber, while the North East and North West regions of England are the highest. 

It’s hard to understand why the two most confident regions should be sandwiched between the two least confident. What could be going right in Newcastle, Durham, Liverpool and Manchester that isn’t working for Leeds, Sheffield, Aberdeen and Dundee?

Are business owners in Glasgow and Edinburgh really less confident than those in Wigan and Hartlepool?

Regional measures are always questionable because they embrace a variety of industries which rarely rise and fall at the same time. Each contains pockets of prosperity and under performance.

Scotland’s overall confidence is bound to be distorted by relatively weak performance in the oil and gas sector, while Edinburgh’s financial services and technology industries are booming. A surge in house prices in Scotland’s two biggest cities doesn’t indicate any shortage of confidence north of the border.

This latest Bank of Scotland report will doubtless grab the BBC Scotland headlines and get the Tories and Labour pointing fingers of blame at the SNP government.

Scotland’s Economy Secretary Keith Brown will refer them to other data showing low unemployment, the relatively low cost of borrowing, demand outstripping the supply of quality offices and fast-growing firms struggling to fill vacancies.

Frankly, confidence tends to be sector specific, rather than geographic. Retailers in Preston surely face the same opportunities and pressures as those in Paisley; call centre operators in Clydebank share similar challenges to those in Clitheroe.

What they all have in common is that there’s nothing much they can do at regional level because in an interlinked world they are all, in one way or another, subject to the ebbs and flows of the global economy and monetary and economic policy determined in London.

If the Bank of Scotland survey really does carry any weight it should raise questions about the effectiveness of the devolution settlement. Both Scotland and Wales, with devolved administrations, are in the bottom half of the confidence league table while the top two regions have no devolved powers at all.

Confidence Index

 

 

 

Region

Jan 2018 (%)

July 2017 (%)

Change (July – Jan)

North East

38

33

+5pts

North West

31

26

+5pts

West Midlands

28

22

+6pts

London

25

20

+5pts

East Midlands

24

24

South East

24

28

-4pts

Wales

20

34

-14pts

South West

19

27

-8pts

East of England

18

22

-4pts

Scotland

17

19

-2pts

Yorkshire & Humber

15

23

-8pts

 

 

 

  



Leave a Reply

Your email address will not be published. Required fields are marked as *

*

This site uses Akismet to reduce spam. Learn how your comment data is processed.