Confidence in economy growing

Scottish private sector expanded at robust pace, claims business review

By Keith Findlay

Published:

The private sector in Scotland expanded at a “robust pace” in February, according to a report published today by global financial information services company Markit.

The upbeat review of business activity last month coincides with findings from another study – by Lloyds TSB – showing firms throughout the UK are “dramatically” more confident about the economy than at the end of last year. Around 600 manufacturing and service-sector companies north of the border were asked for their views in Markit’s latest Purchasing Managers’ Index survey.

The monthly snapshot revealed increases in activity levels, orders and employment as slightly better weather boosted many of the businesses that had been hit hard by January’s freeze.

“Output levels were boosted by new order growth, which in turn raised companies’ staffing requirements,” said Markit.

Markit said it was the eighth successive month it had seen an increase in business activity, while job creation was the strongest in four months. Rising fuel and raw material costs – compounded by unfavourable currency movements – were seen as the principal drivers for the first increase in output prices since October 2008.

Markit economist Andrew Self said the survey confirmed that January’s “stumble” on the road to recovery was primarily due to bad weather.

Output growth had since returned to a rate consistent with November’s two-year peak, he said, adding: “Firms will also take heart from a robust rise in new orders.”

But Mr Self warned that despite the positive signs for the economy last month, activity and new order growth remained well below the average seen across the UK and job creation was inhibited by steep input price inflation.

Lloyds TSB said the weak pound had buoyed trading hopes in February, with 65% of UK firms more optimistic about the overall economy than three months ago. Only 10% were less hopeful and the resulting 55% balance was the strongest ever seen in the bank’s monthly business barometer.

Lloyds TSB said the biggest improvement in confidence was in the industrial sector, where renewed hopes for exports are thought to have been boosted by the weak pound and recovery in global trade volumes.

Trevor Williams, chief economist at Lloyds TSB Corporate Markets, said: “Renewed hope for exports is just the tonic businesses needed.

“For many UK firms involved in exporting it has provided a welcome confidence boost and that’s why we’ve seen such a sharp rise in overall company views about the economic outlook.”

Meanwhile, CBI Scotland has called for a “far greater focus” on exports and private sector investment by the Scottish Government.