THE Scottish economy has been praised for its resilience despite a key survey showing private sector expansion slowed in November to its weakest pace in nine months.
The seasonally-adjusted Royal Bank of Scotland PMI (purchasing managers’ index) decreased to 52.2 in November from 53.4 in October. Growth slowed as an upturn in new private sector orders was offset by manufacturers registering a reduction in sales.
The survey reading was the weakest since March.
However, the Scottish private sector economy again expanded at a greater pace than the UK as a whole, signalling that Scotland has outperformed the UK in all but one survey in the last six months. The UK PMI reading was 50.7 in November, down from 52.1 in October. A score of 50 on the PMI, which measures the combined output of the manufacturing and services sectors, is deemed to separate expansion from contraction.
Sebastian Burnside, chief economist at Royal Bank of Scotland, said it was heartening to see “how much resilience the Scottish economy is displaying”, stating that the country’s success in selling its brand in a host of sectors around the world should not be underestimated.
Mr Burnside said: “We’ve got yet another month where Scotland’s headline numbers are beating the rest of the UK. That is now the case in all but one of the last six months. That’s really strong. Historically it is relatively rare for Scotland to outperform the UK on that basis.”
READ MORE: Brexit forecast to slow Scots growth in 2019
Mr Burnside said the Scottish economy has been helped by the steady recovery of the oil and gas sector. But the economist warned that, as the UK nears the Brexit date of March 29 next year, it was “only natural” that nervousness would rise in the Scottish business community. “We saw that last month, we will probably see it in December,” he added.
Mr Burnside said it was positive that firms in Scotland continued to hire in November in spite of the protracted Brexit negotiations, with employment growth slightly behind October but ahead of the long-term average.
However, he said his biggest concern was the effect Brexit uncertainty is having on business investment levels in Scotland, which remain subdued. Mr Burnside noted: “With unemployment being so low, businesses really are going to need to invest to grow for the future.”
He added: “Some businesses are looking to wait and understand what the overall outlook is before they take the plunge, albeit we need to be realistic and say there are actually lots of [Brexit] outcomes where that uncertainty persists for quite some time. It is something that businesses are learning to live with.”
Royal Bank’s PMI report comes hard on the heels of the closely-watched EY Scottish ITEM Club, which forecast on Friday that economic expansion in Scotland will slow to 1% in 2019 from 1.6% this year. EY flagged the effect of Brexit uncertainty on business investment as well as sluggish growth in employment and disposable income. Mr Burnside said he was “slightly more optimistic” in his outlook for the Scottish economy next year, noting that “we have seen the UK economy respond more sharply to concerns over Brexit.”
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