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Scots services sector lags behind rest of UK

THE key services sector remained much weaker in Scotland than in any other part of the UK in the fourth quarter of 2012, but manufacturers north of the Border enjoyed stronger trading, a key survey reveals today.

RESILIENCE: Scottish Chambers of Commerce chief executive Liz Cameron said while the economy was fragile, manufacturers were proving resilient.
RESILIENCE: Scottish Chambers of Commerce chief executive Liz Cameron said while the economy was fragile, manufacturers were proving resilient.

The survey, published by the British Chambers of Commerce, also shows manufacturers and services companies in Scotland are the least confident in the UK about the prospects for turnover and profitability.

It does not provide reasons for services sector weakness in Scotland. There is some evidence consumers north of the Border are more cautious, partly because of the Scottish economy's greater reliance on a public sector affected by Coalition Government cuts. The weaker business confidence in Scotland signalled by the British Chambers survey may also be affecting the services sector.

Liz Cameron, chief executive of Scottish Chambers of Commerce, warned on the basis of the survey findings that the state of the Scottish economy "remains fragile".

However, she cited the "resilience" of Scottish manufacturers in the past five years, while noting the Scottish economy had not benefited particularly from the London Olympics effect last year.

The British Chambers report follows a survey from Lloyds TSB Scotland last week which signalled that services companies north of the Border had suffered a significant fall in turnover in the three months to November.

Subtracting the proportion of services firms reporting a rise from that experiencing a fall, while adjusting the findings to give larger companies a greater weighting, the British Chambers survey shows respective balances of 27% and 21% of Scottish services firms suffered a drop in sales and orders in the UK market-place in the fourth quarter.

The wider UK services sector put in a much better performance, with a weighted net 11% of firms reporting a rise in domestic sales and a balance of 7% enjoying an increase in home orders. However, the fall in domestic sales and orders for Scottish services firms in the fourth quarter was not quite as steep as that signalled by the British Chambers survey in the preceding three months.

Scotland was the only part of the UK in which services companies, overall, suffered a steep drop in staffing in the fourth quarter and forecast a further fall in employment during the next three months.

London was the only other part of the UK where there was a contraction of services sector staff in the fourth quarter, but the fall was marginal. The survey signalled likely growth in service sector staff in all nations and regions of the UK, except Scotland, in the next three months.

In Scotland, a weighted net 16% of services companies reported a fall in employment during the fourth quarter. And a net 18% predicted a further drop in staffing in the next three months.

Respective weighted balances of 17% and 31% of Scottish services companies predicted their turnover and profitability would worsen over the next 12 months.

Scottish manufacturers enjoyed an improvement in trading in the fourth quarter, after a poor showing in the preceding three months, according to the British Chambers survey. The survey shows the Scottish manufacturing sector achieved a return to export growth in the fourth quarter, after a slide in overseas sales in the preceding three months.

Respective weighted balances of 15% and 14% of Scottish manufacturers reported a rise in domestic and export sales in the fourth quarter. Both of these balances exceeded the UK averages.

The decline in the Scottish manufacturing workforce projected in the previous British Chambers survey did not materialise, with a slight rise in the fourth quarter and an expectation of further modest recruitment.

While a weighted net 13% of Scottish manufacturers forecast an improvement in turnover during the next 12 months, this was well adrift of a corresponding balance of 41% for the UK as a whole. And the weighted balance of 3% of Scottish manufacturers forecasting improved profitability on a 12-month view was well adrift of a UK average balance of 30%.

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