Scottish firms see modest growth but exports keep falling

SCOTTISH firms achieved modest overall growth in business volumes in the three months to August, but exports continued to fall in spite of the pound’s weakness since the Brexit vote, a key survey has signalled.

Royal Bank of Scotland’s business monitor, compiled by Strathclyde University’s Fraser of Allander Institute, shows a strong performance by the tourism industry north of the Border, with 55 per cent of firms in this sector reporting a rise in total business volumes.

The tourism sector seems likely to have received a boost from the pound’s weakness since the June 23 vote to leave the European Union, which has made Scotland a cheaper destination for overseas visitors.

However, the survey of 450 Scottish businesses also reveals a widespread rise in costs, which Royal Bank noted could reflect the weak pound. Nearly 40 per cent of firms experienced a rise in costs in the three months to August.

The monitor underlines the continuing impact of the oil and gas downturn, with 41 per cent of firms in northeast Scotland reporting a fall in total business volumes.

Overall, 33 per cent of Scottish firms achieved a rise in business volumes in the three months to August, with 30 per cent recording a decline and the remainder reporting an unchanged position.

The net three per cent achieving an increase points to modest overall growth in business volumes.

Professor Graeme Roy, director of the Fraser of Allander Institute, said: “The ongoing weakness in exporting and the apparent rise in business costs is a cause for concern. However, on the back of significant economic and political uncertainty over the summer, the fact that a net balance of Scottish firms have reported growth – albeit at the margin – is grounds for cautious optimism.”

A net seven per cent of Scottish firms predicted a rise in business volumes over the next six months.

Stephen Boyle, chief economist at Royal Bank, was encouraged by the “modest” growth in the three months to August, and expectations of continuing expansion.

However, he added: “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.”