SCOTLAND’S private-sector economy contracted for the fifth time in six months in May, after modest growth in April, a survey shows.
The fall was driven by contraction of the services sector, with manufacturers recording a marginal increase in production, according to Royal Bank of Scotland’s latest PMI (purchasing managers’ index) report. Royal Bank cited worries among businesses about Brexit and slowing economic growth.
The headline business activity index for Scotland fell from 51 in April to 48.9 in May on a seasonally adjusted basis, falling below the level of 50 deemed to separate expansion from contraction. Among nations and regions of the UK, only Northern Ireland recorded a sharper monthly fall in output than Scotland in May.
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Malcolm Buchanan, who chairs Royal Bank’s Scotland board, said: “Brexit-related concerns and fears of slowing economic growth north of the Border remained prominent, ultimately keeping business confidence subdued and below the UK average.”
In contrast, the Federation of Small Businesses’ latest survey shows a bounce-back in confidence among its members north of the Border in the latest quarter, although it also highlights rising costs and pressure on profits. The FSB’s Scottish small business index, which measures confidence, jumped by a record 37.5 points to +3.3 during the latest quarter. The UK small business index fell from -5 to -8.8.
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The delay to Brexit was cited as one possible reason for the rebound in Scottish small business confidence.
FSB Scotland policy chairman Andrew McRae said: “After five years lagging behind the UK average – and some record-low readings over the last six months – it’s a refreshing change to see Scotland bucking the trend in a positive way.
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While warning sentiment could fall back just as quickly, he added: “It’s hard to point to a single factor behind this. The mini heatwave around Easter has reportedly given some important sectors a bit of a bounce. Equally, the Brexit extension in April let businesses breathe a sigh of relief that the threat of crashing out of the EU without a deal had receded for the immediate future.”
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