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Economic prospects

Surveys give mixed picture on business outlook

Wagamama, service, hospitality, restaurant

Serving up a mixed picture: surveys point to different circumstances (photo by Terry Murden)


 

Two business surveys today give contrasting views of the services sector with one claiming it is surging and another saying it is slowing down.

According to the latest Royal Bank of Scotland PMI, output across the Scottish private sector economy increased at the fastest pace since July 2017 during May.

Business activity growth was underpinned by the sharpest expansion in order book volumes for 46 months. Subsequently, firms hired additional staff at a quicker rate.

It was the strongest rate of private sector output growth in ten months. Furthermore, for the first time since October last year, the overall rise was broad-based, with both manufacturers and service providers observing greater business activity.

Overall, the rate of growth in Scotland was stronger than that seen for the UK as a whole.

Sebastian Burnside, chief economist at Royal Bank of Scotland, said: “Businesses in Scotland reported a rapid improvement in trading conditions over the last three months, helped by bulging order books. 

“The service sector is leading the charge at the moment but the resurgent oil price should help boost engineering activity in the North East, too.”

However, business adviser BDO says the services sector is SLOWING down and is adversely impacting business output.

Its latest Business Trends Report, which measures UK business output, fell in May. It said this decline was driven by the sluggish growth of the services sector, which makes up the majority of the UK’s economic output. BDO’s Services Sector Output Index dropped 1.36 points from the previous month to 97.90, its lowest reading since October 2012.

Martin Gill, Lead Partner of BDO in Scotland, said: “After a poor first quarter, the UK economy is struggling to pick up the pace of growth in Q2. Business output is slowing and consumers are continuing to tighten their purse strings as they feel the pressure of rising prices and stuttering wage growth. 

“The Scottish and UK governments need to act fast to inject the nation with a confidence boost to encourage spending and investment.

“As we approach the two-year anniversary of the UK’s decision to leave the European Union, we need greater clarity on our exit plan so that businesses and consumers can feel rest-assured about making important investment and spending decisions for the future.”

 



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