SCS survey offers ray of hope for Scottish economy

The recession-hit Scottish manufacturers are anticipating a modest rise in export activity by this time next year, raising hopes that exports may lead the Scottish economy from recession and into growth, according to the latest quarterly economic survey published yesterday.

The conducted by the Scottish Chambers of Commerce (SCS) and Fraser of Allander Institute,offers a glimmer of hope for the beleaguered Scottish economy; there are signs the rate of decline may ease slightly, led by a recovery in manufacturing and tourism, the survey noted.

''A closer examination of the figures does reveal that in some sectors the rate of decline is easing, with a small number of businesses performing well against a challenging background,'' said Liz Cameron, chief executive of SCC.

 The survey, conducted among 300 businesses across all sectors of the economy, comes just days after Royal Bank of Scotland's purchasing managers' index (PMI) for March suggested the private-sector economy may be ''beyond the worst'' of the recession.

Firms were asked about the trend over the past three months and what they expect over the next three.

Weak demand continued to blight firms and business confidence deteriorated further, the poll found. Trading remained weak in all sectors in the first three months of this year.

However, the fall in export orders are easing, and rising number of businesses are expecting to export more by the start of 2010.

This would represent an important boost to the Scottish economy, especially at a time when the previously buoyant financial sector has been thrown into turmoil, Cameron said.

''Scottish business confidence has been battered over the past year and our latest survey reveals that, on the surface, there seem to be few signs of improvement in the short term,'' she added.

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Official data published earlier this month showed Scottish manufactured exports dipped by 9.6 per cent quarter-on-quarter during the final three months of last year, as overseas sales by drinks and electronics companies tumbled.

This plunge pushed the level of exports in the fourth quarter of 2008 below that recorded in the opening quarter of 1995.

Scottish manufactured exports in the fourth quarter of last year were more than one-third below the recent peak in the final three months of 2000.

These exports data added to fears that impending official data will show a very sharp fall in Scottish gross domestic product in the fourth quarter of last year.

The PMI report earlier this week signalled the rate of decline of private sector output in the first quarter of this year has been worse in Scotland than UK-wide. But a significant easing of the rate of decline from February's precipitous pace, which had been the fastest since comparable records began in 1998, raised hopes that the deepest point of the recession is past.

The survey ''points to a difficult year ahead for Scottish businesses, with weak demand and continued pressures on profits and margins,'' she said.

And, crucially, on the jobs front, the number of manufacturing businesses cutting staff is said to have ''increased significantly'' in the first quarter while no retail firms either increased or expect to increase total employment levels.

Three-quarters of manufacturing and construction respondents and some four-fifths of wholesale and retail businesses reported being less confident than a year ago.

Over the next year more than 60 per cent of manufacturers anticipate declining trends in total domestic orders.

However, while there have been signs that the economy might be coming out of its freefall phase, with output now declining at a marginally less alarming pace.

"A dry summer would assist greatly in marketing Scotland's attractions as a tourist destination, especially with globally significant events such as the Open golf championship taking place in Scotland," she hopes.

According to monetary policy committee member-designate David Miles, the worst of the recession may be over.

In an interview published yesterday, he argued that interest rate cuts and efforts to rid the banks of their toxic debts are starting to work.

"Substantial cuts in interests rates and more quantitative easing is likely, with a certain time lag, to have a substantial impact on demand in the economy and it may well be that the worst of the recession may well be behind us," he says.