Scots firms end the year upbeat but headwinds persist

● Final RBS business monitor of 2016 shows tourism among strongest sectors

businesses have ended the year on a broadly optimistic note but inflationary pressures are leading to rising costs, a key report today indicates.

The latest Royal Bank of Scotland business monitor shows continued improvement in the economy during the three months to November, with companies expecting the trend to continue into the new year.

Transport, communications, tourism and construction were found to be the main sectors underpinning the growth while manufacturing and distribution have been struggling.

The regular survey, which is conducted by Strathclyde University’s Fraser of Allander Institute, also found that inflationary pressures were leading to an upturn in costs with export activity weaker than in the previous three-month period.

Overall, a net 8 per cent of the 400 or so firms surveyed said they expected total business volumes to rise in the six months. Optimism is highest within tourism with a net 28 per cent expecting to see an increase.

However, the weak oil price continues to impact businesses in the North-east with a net 19 per cent of firms based there preparing for a fall in volumes.

Stephen Boyle, chief economist with Royal Bank of Scotland, said: “This Christmas we can raise a festive glass for Scotland’s economy that’s more than half full. Our businesses are ending the year on a positive note, with solid if unspectacular growth. They expect more of the same in the first half of 2017.

“Particularly encouraging is strongly rising capital investment, a sign both of confidence in the future and of businesses’ ability to look beyond political uncertainty.

“If the new year brings any hangovers they are likely to come from rising cost pressures – brought about by the weaker pound and the Nationscottish al Living Wage – and continued poor export performance.”

Professor Graeme Roy, director of the Fraser of Allander Institute, added: “This final business monitor for 2016 offers some relatively positive news at the end of a challenging year for Scotland’s economy.”

The report comes as a CBI study today reveals that two out of five UK firms will recruit more staff next year despite continuing worries over a shortage of skilled workers and the impact of Brexit.

The research found that growth in permanent jobs will outstrip temporary recruitment for the fourth year in a row.

But the survey of more than 350 firms also revealed that uncertainty over the UK’S future relationship with the EU has shaken business confidence in the labour market.

Skills shortages were said to be the biggest threat to competitiveness, with over half of those polled concerned about future access to skilled migrant workers. Almost a third of firms said they expected to create apprenticeships.