THE recovery in the Scottish economy has yet to pick up pace, according to the latest Lloyds TSB Scotland Business Monitor
In the three months ending February 2012, just under a third (29%) of firms surveyed increased turnover, 36% experienced static turnover, and just over a third (35%) experienced a decrease.
This gave a net balance of -6%; a slight deterioration from the -3% of the previous quarter but a substantial improvement on the -20% of the same quarter one year ago.
This latest Business Monitor shows a slight deterioration in the rate of recovery. However, expectations are showing a significant uplift reducing the likelihood of a return to recession.
The overall net balance for turnover for firms in the production sector in the three months to end February this year was +2%. This is a fall on the +9% of the previous quarter but is significantly better than the -15% of the same quarter one year ago.
Service businesses did not experienced such benign conditions with the overall net balance for turnover for the three months ending February at -11% – worse than the -8% of the previous quarter but, like the production sector, much improved from the -22% of the same quarter one year ago.
Volumes of repeat business were largely similar to the previous quarter with a net balance of -9% this quarter compared to -6% in the previous quarter, but again significantly improved on the -12% of the same quarter one year ago. Trends in the volume of new business are better, with an overall net balance of -6% – a slight improvement on the -7% of the previous quarter and again much improved on the -15% of the same quarter one year ago.
There has been a recovery in export activity. In the latest three months the net balance of export activity was -4% – a significant improvement from the -17% of the previous quarter and exactly similar to the -4% of the same quarter one year ago. The Eurozone sovereign debt crisis appears to have affected export activity with improving sentiment on the Eurozone sovereign debt crisis occurring after the survey was conducted. However, expectations for export activity have improved significantly.
Last quarter
Firms’ assessment of their immediate prospects in the next six months have improved dramatically since the last quarter. Expectations for turnover in the next six months have risen to an overall net balance of +2% – a significant uplift from the -14% of the previous quarter and near to the +6% of the same quarter one year ago. Almost half (46%) expect their turnover to be unchanged in the next six months, while 26% expect a decrease. However 28% expect an increase. This is a welcome increase in business confidence showing a distinct improvement from last quarter and the depths of the recession in 2008/09, but still markedly below pre-recession levels.
Production firms are marginally more positive than services with a net balance of +4% compared to a +1% for services businesses. Expectations for the volume of repeat business improved to an overall net balance of -3% for this quarter compared to -11% in the previous quarter. Expectations for the volume of new business are muted with an overall net balance of -5%. This is slightly better than the -7% of the previous quarter but is slightly down on the +4% of the same quarter one year ago.
Donald MacRae, chief economist, Lloyds TSB Scotland said: “This latest Business Monitor suggests the muted recovery in the Scottish economy has yet to pick up pace. However, there is no definite sign of a lapse into a “double dip” but every indication of a continuing slow recovery with negligible growth in the latest quarter. However, there is a discernible uplift in business confidence with expectations recovering from the downwards plunge of last quarter. The risk of a return to recession or a “double dip” has reduced and the likelihood of growth, albeit low, in the Scottish economy for 2012 has improved.”
