Private sector suffers slowdown in growth

SCOTT WRIGHT

Manufacturing growth softened in June having previously driven private sector expansion.

unchanged rate of expansion since May. However, there was also some positive news. Employment returned to growth and input price inflation further decreased in the latest survey. In addition, June’s data extended the current sequence of expansion to seven months, the longest recorded for almost two and half years. Finally, business confidence fell in June, although to a lesser extent than seen across the UK as a whole.”

While the survey found manufacturers increased output at a “solid pace overall” in June, the rate of expansion was slower than in the previous month. And production in the Scottish manufacturing sector was founded to have expanded in June at its slowest rate in six months.

Asked to compare levels of output/production in June with the previous month, 27.2 per cent said levels were higher and 12.5 per cent noted lower levels. That led to a reading of 53.7 on the seasonally-adjusted output index, down from 55.3 in May.

However, while manufacturing expansion eased since May, the survey found that production growth was higher than that of business activity in the service sector, which remained unchanged in June. Some 23 per cent of services companies reported higher business activity, with 16.3 per cent reporting lower levels, leading to a seasonally adjusted 50.5 on the index.

“The rate of expansion was marginal overall and below the

series’ long-run average,” the report said of the services sector.

On jobs, the survey signalled a return to employment growth in June. It found job creation was broad-based in the manufacturing and services sectors, and faster among manufacturing companies. However, jobs growth was weaker than the UK as a whole.

Meanwhile, input price inflation remained sharp despite easing slightly, with the rate of increase in cost burdens above the long-term average. The report said there was evidence linking rising input costs to pay pressures and the weak pound. Output price inflation came in at a seven-month low in June, with the average prices charged increasing only moderately. THE growth in e-commerce and a lack of new stock are combining to push up prices and rentals in Scotland’s industrial property market.

Knight Frank’s latest Logistics and Industrial Commentary (LOGIC) report, covering the first six months of 2017, highlights a 54 per cent increase in purchases against the previous six months, up to £88 million from £57m.

Calling the current situation a “perfect market” for investors, Jamie Fergusson, capital markets partner at Knight Frank, said: “Investors are chasing industrial property. The only way for rents to go in the foreseeable future is up.”

He added that increased yields and valuations reflected the sector’s strength: “Although we are almost at the point where speculative development is viable – there’s little sign of the market topping out.”

Glasgow saw a number of deals involving larger premises, driving a 23 per cent uplift in units more than 50,000 sq ft. Limited stock in the city has seen rent on properties less than 20,000 sq ft hitting £8 per square foot.

Conversely, activity in Edinburgh has been concentrated around the sub-5,000 sq ft band, with requirements largely coming from local SMEs and last-mile delivery services. Steady demand, coupled with a lack of available land, has pushed rents up to £9 per sq ft, said Knight Frank.

In Aberdeen, demand continues to be impacted by the oil and gas downturn. Headline rents have fallen since the beginning of 2017 and incentives of up to 12 and 18 months are being exchanged for fiveand 10-year leases, respectively.

Calling the market buoyant, Simon Capaldi, industrial agency partner at Knight Frank in Edinburgh, said: “A chronic lack of supply and limited new-build activity are forcing rents upwards in Edinburgh and Glasgow.”