The Elite Ayrshire Business Circle

The Elite Ayrshire Business Circle

Tuesday, 15 September 2009

Scottish economy on track to exit recession

SCOTLAND’S economy is on track to exit recession later this year, according to the latest Lloyds TSB Scotland Business Monitor.

This latest edition for the three months ending 31 August 2009 shows 40 per cent of firms surveyed reporting a decrease in turnover, 33 per cent reporting static turnover and 27 per cent reporting an increase, giving a net balance of -13 per cent, a marked improvement on the previous quarter’s figure of -21 per cent.

[Pictured: Professor Donald MacRae.]

Service businesses show the most obvious signs of improvement, with businesses reporting a net balance on turnover of -7 per cent, compared with a figure of -19 per cent in the last quarter. Volumes of both new and repeat business have improved in the last three months.

Production businesses showed a slight improvement in turnover with a net balance of -24 per cent, compared with -26 per cent in the previous quarter. Output in the production sector is still in decline but the rate of decline is lessening.

Expectations of increasing turnover in the next six months remain negative for the fifth consecutive quarter, but at -1 per cent and only just negative, they have improved markedly. Three months ago, this figure stood at -10 per cent, six months ago at -28 per cent and nine months ago at -44 per cent.

In the service sector, for the first time in 15 months, more firms expect turnover to increase in the next six months than decrease. If these expectations are realised, the Scottish economy should exit recession and return to growth by the year end. Expectations of production businesses have improved but remain negative and significantly worse than for service businesses with the net balance standing at -10 per cent, up from -15 per cent in the previous quarter.

For the whole of 2008, businesses were increasingly pessimistic about the level of demand for their products and services. This has reversed for three consecutive quarters with firms indicating a further fall in the importance of weakening demand in the latest quarter. This coincides with the improvement in forward looking indicators in the Business Monitor and is consistent with a return to economic growth by the end of this year.

Lloyds TSB Scotland chief economist Professor Donald MacRae said: “The Scottish economy last year entered the worst recession for decades. Output decline has been sharp and large. However, this latest Business Monitor shows the service sector about to emerge from recession with production businesses some way behind. Most forward looking indicators are showing an increase in expectations for the remainder of the year, suggesting a return to economic growth for the Scottish economy by the end of 2009.

“The effects of the recession are fading, but the Scottish economy has yet to fully emerge from decline into growth.”

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