STRONG inflationary pressures are building across the Scottish economy, but manufacturing has recorded a better performance in the latest quarter and tourism is doing well, a survey reveals today.

The survey from Scottish Chambers of Commerce comes hard on the heels of official figures yesterday showing the economy north of the Border grew by just 0.2 per cent quarter-on-quarter during the three months to September. This was adrift of below-trend expansion of 0.6 per cent in the UK as a whole in the third quarter.

Economist John McLaren, honorary professor at the University of Glasgow’s Adam Smith Business School, said: “The latest Scottish GDP (gross domestic product) figures are grim…This continues the longer-term sluggish performance of the Scottish economy over the last three years relative to the UK.”

Scottish Chambers’ survey could raise hopes that the manufacturing sector, shown yesterday to have contracted by 1.9 per cent during the third quarter in the Scottish Government figures, might have performed better in the final three months of last year on the official measure.

Garry Clark, head of Scottish Chambers’ economic development intelligence unit, welcomed his organisation’s survey findings of significant rises in new orders, employment and investment in the manufacturing sector north of the Border in the fourth quarter.

And he highlighted the strength of the tourism sector, noting its guest and customer numbers in the fourth quarter were well ahead of the same period of 2015 and a rise in the number of overseas visitors. There have been signs that the pound’s tumble since last June’s Brexit vote, which has made the UK cheaper for overseas visitors, has fuelled tourism demand.

However, Mr Clark also flagged mounting inflationary pressures across the Scottish economy on the back of sterling weakness.

He said: “The negative aspects of it [the survey] - and where there might be sort of clouds on the horizon - would be the expectations of price increases. That is particularly noticeable in the front-line areas like retail and manufacturing.

“If there is any damage to the ability of consumer demand to continue to grow the economy, that is obviously a concern. Certainly, retailers are telling us they are expecting a bit of flow-through from the weakness of the pound into increases in the costs of goods they are importing and passing on to the consumer.”

The survey signals big price rises in the current quarter in all of the sectors covered.

In the Scottish manufacturing sector, 53.8 per cent of companies are forecasting a rise in their prices this quarter, with only 1.9 per cent anticipating a drop and 44.2 per cent seeing no change.

This means that a rounded balance of 52 per cent of Scottish manufacturers expect to raise prices. This is up dramatically from the net 19 per cent forecasting a rise in prices in the previous quarterly survey.

In the retail and wholesale sectors, a net 56 per cent of companies expect to increase their prices this quarter. A net 45 per cent of tourism providers expect to raise prices.

A balance of 33 per cent of construction firms and a net 18 per cent of companies in the financial and business services sector expect to raise their prices this quarter.

Asked about current views on Brexit among Scottish Chambers and its member businesses, in the wake of Prime Minister Theresa May’s speech on Tuesday, Mr Clark replied: “Membership of the single market doesn’t look to be on the agenda at all but, from what the PM was saying, they are looking at some form of trading agreement with the single market that eliminates tariff barriers and indeed non-tariff barriers.

“At the end of the day, it is that sort of solution businesses are looking for. We are still no closer to finding out if we are getting that. We know what the starting point is for negotiations. We don’t know what the end point is going to look like.”

First Minister Nicola Sturgeon said on Tuesday that Mrs May’s confirmation that the UK’s membership of the single market was ending had “undoubtedly” brought a second independence referendum closer.

Asked about talk of an increased likelihood of a second independence referendum, Mr Clark replied: “Members have told us what they want governments to be doing is delivering on infrastructure, investment, skills, getting tax right and making sure we have clear guidance on what our trading relationship with Europe and the rest of the world looks like. If and when a proposal for a second Scottish independence referendum comes on the table, I think members will measure it against those sort of criteria.”

Scottish Chambers’ survey found business optimism was “marginally positive” in all sectors covered apart from financial and business services.