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Little sign of growth as economy limps on

THE Scottish economy continues to stagnate with few signs of sustained growth, according to a survey published today.

HARD TIMES: The Scottish economy is continuing to stagnate, according to figures published today by Lloyds TSB. Picture: Julie Howden
HARD TIMES: The Scottish economy is continuing to stagnate, according to figures published today by Lloyds TSB. Picture: Julie Howden

The Lloyds TSB Scotland Business Monitor found 39% of firms questioned reported a decrease in turnover, with 32% saying their figure was static and 29% recording an increase in the three months to the end of November last year.

This gave a net balance, the difference between the negative and positive responses, of -10% which was a deterioration from the -3% in same period a year ago and the -3% in the previous quarter of 2012.

The production sector, which includes manufacturing, had a net balance of +1% which was an improvement on the -2% of the previous quarter but down from the +9% in 2011.

The deterioration in the services sector was more pronounced with the net balance for the three months to the end of November 2012 at -16% which was worse than the +1% in the earlier quarter and the -8% of the previous year.

Donald MacRae, chief economist at Lloyds TSB Scotland, believes there are not yet many indications that Scotland may go back into a prolonged recession.

He said: "The Scottish economy stagnated during the summer. This latest Business Monitor suggests the stagnation of the summer has continued. However, there are no definite signs of a relapse into deep recession."

The survey found volumes of repeat business improved slightly with a net balance of -5% compared with -6% a year ago. Volumes of new business were also better, at -1% against the -7% seen in 2011.

Export activity was a -3%, which was poorer than the 0% recorded in the previous quarter but a significant improvement on the -17% of a year ago.

There were also signs confidence was beginning to return after deteriorating through much of 2012.

There were 49% of businesses expecting turnover to be static in the next six months, with 23% predicting an increase and 28% pencilling in a fall.

That gives an overall net balance of -5%, which is better than the -7% of the previous quarter and more optimistic than the -14% recorded in 2011. Production firms were more positive in their outlook than service firms.

Overall expectations of export activity across the next three months improved greatly to +16% compared to -3% in the previous quarter and -15% a year ago.

Repeat business expectations improved from -11% in 2011 to -6% in the three months to the end of November, while new business went from -7% to -5%.

Mr MacRae added: "Despite the apparent poor performance in autumn, business expectations for 2013 have improved from a low position.

"A return to more vigorous growth in the Scottish economy awaits a further increase in confidence in both consumers and businesses.

"This in turn depends upon building on policy measures to contain the eurozone sovereign debt crisis and implementing policies to restore the eurozone and UK economies to growth."

A Scottish Government spokesman said: "We are doing all we can to support Scotland's business community and our economic strategy makes clear that delivering sustainable economic growth is our top priority.

"While it is encouraging to see such a significant improvement in firms' expectations for future export activity, we recognise that Scottish businesses continue to face a challenging economic environment."

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