Modest growth for Scottish firms

By Stephen Boyle, Chief Economist at the Royal Bank of Scotland

21 October 2016

Stephen Boyle is the chief economist with the Royal Bank of Scotland. The bank recently published its Scottish Quarterly Business Monitor, a survey of companies across the country. Stephen reflects on its findings.

A strong summer for Scottish tourism reflects increased business confidence across the country.

Companies expect to see an increase in turnover, new business and repeat business over the next six months following a summer of modest growth.

However marked differences remain between areas of Scotland, with the North East expecting further declines in activity while the central belt and Highlands and Islands expect growth.

The survey of 450 Scottish businesses reveals that a third (33%) of firms reported an increase in the total volume of business during the last quarter, compared to 30% who witnessed a fall in activity.

The performance of the tourism sector was especially strong, with more than half of firms (55%) reporting an increase in total business volumes. This is in contrast with the transport and communications sector where only 18% of firms reported an increase.

Collectively, a third (33%) of all firms surveyed said they expected total business volumes to rise over the next six months. A quarter (26%) are preparing for a decline. Almost a third (31%) expect to see an increase in the volume of new business compared to a quarter (24%) who are expecting a fall.

In terms of repeat business, almost a quarter (22%) are preparing for a downturn. Of all the businesses surveyed, manufacturing is the least optimistic with 28% expecting a downturn.

Just over a third (35%) of firms said that turnover climbed during the last quarter, compared to around one in five (21%) who experienced decrease.

Collectively, 28% of firms say they expect sales to grow over the next quarter. Within tourism, almost half (47%) reported that they expect to enjoy growth.

Just one in seven firms (14%) stated that export activity rose, while a quarter (25%) saw it fall. Despite this, a quarter (25%) expect an increase in the six months to February 2017, perhaps as a result of the recent decline in the value of the pound.

Around four in ten (39%) firms experienced a rise in costs over the last three months, with a third (32%) expecting that trend to continue, which could in part reflect the weaker pound.

Cost pressure was especially strong in tourism where a net 47% reported an increase and in distribution (38%), which includes retail and wholesale. This could be attributable to the higher National Living Wage.

Stephen Boyle, chief economist with the Royal Bank of Scotland, said: “It is encouraging that growth appears to have continued in the three months to August, albeit at modest rates.

“What’s more, firms are optimistic that growth will continue into 2017.

“The fly in the ointment is rising costs. These are already squeezing some firms’ margins and will eventually blunt consumers’ spending power as prices rise.

“But Scotland’s economy appears better-placed to weather those challenges than it was even six months ago.”

For more information on Royal Bank of Scotland’s economic surveys and how the bank can support you or the sectors in which you operate, contact Paula Ritchie at paula.ritchie@rbs.co.uk or Gavin Wilson at gavin.wilson@rbs.co.uk


More information on RBS, ICAS practice community partner


About the author

Stephen Boyle is the Royal Bank of Scotland’s chief economist.

The bank works closely with one of the world’s leading economic research bodies, Strathclyde University’s Fraser of Allander Institute, to produce The Royal Bank of Scotland Quarterly Business Monitor.

Following the Brexit vote and the value of the pound plummeting against the Euro, there was interest to see what the findings from the latest report would be.

About the company

The Royal Bank of Scotland is one of the biggest supporters of the Scottish SME sector. Formed in 1727, the Edinburgh headquartered bank has a team of dedicated professionals’ sector specialists across Scotland. It became an ICAS community partner in 2016.

This blog is one of a series of articles from our commercial partners.
The views expressed are those of the author and not necessarily those of ICAS.


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