THE Scottish private sector economy shed jobs in January at the fastest pace since July last year, as manufacturing continued to contract and services output grew only marginally, a survey has shown.
Bank of Scotland’s latest Purchasing Managers’ Index (PMI) report, published today, also signals the growth rate north of the Border remains well adrift of the pace of expansion for the UK as a whole.
Oil and gas sector weakness is again cited by Bank of Scotland as a drag on the broader economy north of the Border.
The output index for Scotland’s private sector economy came in at 50.3 in January on a seasonally-adjusted basis, unchanged from December and only marginally above the level of 50 deemed to separate expansion from contraction. The index had been at 49.8 in November.
The UK-wide output index rose from 55.3 in December to 56.1 in January. Figures from the Office for National Statistics have shown that the UK economy’s growth has in recent quarters been stuck well below its long-term annual average rate, which has been put at about 2.75 per cent by Bank of England Governor Mark Carney.
The employment index for the Scottish private sector economy fell from 49.7 in December to 49.3 in January, to signal an acceleration in the pace of job-shedding to the fastest rate since July 2015.
Both the Scottish manufacturing and services sectors reported falls in their workforces in January, with higher wage costs and the oil industry downturn cited as factors. The fall in Scottish services sector employment in January was the first since last July.
A separate survey published today by accountancy firm Grant Thornton shows that 56 per cent of Scottish businesses believe their profits will rise this year. In the UK as a whole, 63 per cent of survey respondents predicted an increase in profits.
The survey shows that 46 per cent of Scottish businesses expect to increase headcount over the next 12 months.
It also shows that 58 per cent of Scottish businesses plan to expand domestically. And eight per cent intend to expand overseas.
Meanwhile, 14 per cent of Scottish businesses are looking to increase their exports. This is below the UK-wide average of 23 per cent aiming to raise overseas sales.
The Bank of Scotland PMI report showed a slight acceleration in growth of new business for the private sector economy north of the Border. However, the pace of increase remained only modest, with the new business index rising from 50.8 in December to 51.2 in January.
Alasdair Gardner, Bank of Scotland’s managing director for commercial banking north of the Border, said, “Growth in Scotland’s private sector remained in a low gear during the first month of 2016 as service providers continued to outperform their manufacturing counterparts.”
He added: “Challenging market conditions in the oil and gas sector allowed for only a slight rise in incoming new business levels, whilst job-shedding accelerated to a six-month high. Firms reported a further lack of pressure on capacity throughout the private sector, yet this was not enough to halt the current upturn in the Scottish economy.”
The overall growth of new business in Scotland was driven by the services sector.
Manufacturers north of the Border continued to experience falls in total new orders in January. And Scottish manufacturers recorded another fall in new export orders last month, although the pace of decline eased to its least-sharp in three months. An unfavourable sterling exchange rate was cited by survey respondents as a key factor in the continuing decline of export orders.
Figures published last month by the Scottish Government showed that the economy north of the Border grew by only 0.1 per cent in the third quarter of last year, well adrift of the below-trend expansion rate of 0.4 per cent in the UK as a whole.
This was the second consecutive quarter in which the Scottish economy had been close to stagnation, with gross domestic product having grown only 0.1 per cent in the three months to June.
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