THE key services sector is performing significantly worse in Scotland than in any other part of the UK, a survey from the British Chambers of Commerce reveals today.
The survey shows significant cuts in workforces among both Scottish services and manufacturing companies in the fourth quarter of last year, with further big job losses predicted by firms in both sectors in the opening three months of 2012.
The quarterly economic survey will heighten fears of a renewed recession.
In a UK-wide context, British Chambers warns: "Recession is still avoidable, but risks of a setback have increased".
And it notes the UK-wide domestic market order balances for services and manufacturing "highlight risks of declines early in 2012".
The British Chambers survey showed Scottish manufacturers' domestic sales rose modestly during the fourth quarter, However, it signalled a decline in the more forward-looking indicator of domestic orders for Scottish manufacturers.
Meanwhile, Scottish services companies signalled a steep decline in both domestic sales and orders in the fourth quarter. Subtracting the percentage of firms reporting a rise from that suffering a decline, and weighting the figures according to the size of companies responding, a net 38% of Scottish services companies suffered a fall in sales within the UK marketplace, while a balance of 49% suffered a drop in domestic orders. UK-wide, a weighted net 2% of services companies enjoyed a rise in domestic sales.
The Scottish service sector readings were the worst in any part of the UK. A weighted net 2% of services companies UK-wide expected to increase employment in the first quarter, in contrast to a balance of 23% in Scotland predicting a decline in the workforce over this period.
Liz Cameron, chief executive of Scottish Chambers of Commerce, said: "The survey figures do not present an optimistic picture for Scottish businesses. While the manufacturing outlook remains relatively stable, the service sector is displaying a lack of confidence moving into 2012."
She also highlighted signs that small businesses in particular were not recruiting.
The British Chambers survey paints a considerably more bleak picture of the economy north of the border than the latest PMI Scotland report, published by Bank of Scotland yesterday.
The PMI report pointed to marginal growth in the Scottish private sector economy in December, and showed an albeit modest rise in employment. However, the PMI Scotland report signalled growth in Scotland last month was much weaker than that UK-wide, and showed the first contraction in manufacturing output north of the Border since December 2010.
In the British Chambers survey, the readings for domestic sales and orders in the manufacturing sector are not as bad in Scotland as in the UK as a whole.
Ms Cameron said: "What is common across the sectors is recruitment has stalled, particularly in the small businesses that make up such a large majority of Scotland's private sector.
"As private sector recruitment has been replacing the jobs shed by the public sector, these results should concentrate the minds of decision-makers to take measures to provide businesses with the confidence and the stable environment that they require to be able to take on new staff."
The British Chambers survey points to slowing growth of Scottish manufacturers' export sales in the fourth quarter. And it signals an outright fall in the more forward-looking export orders component in the final three months of last year. A weighted net 5% of Scottish manufacturers suffered a decline in export orders in the fourth quarter of 2011. This was in contrast to a weighted net 14% enjoying a rise in the preceding three months.
Ms Cameron said: "Exports, which have been the saving grace of our manufacturing sector over the recent period, must also be watched carefully. Some parts of this sector are presenting a plurality reporting an export decrease."
UK-wide, a weighted net 9% of services companies suffered a fall in domestic orders in the fourth quarter. A weighted net 13% of UK manufacturers encountered a fall in domestic orders.
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