Bank of Scotland survey reveals business optimism

The vast majority of the recruitment rise was in the manufacturing sector

Business activity in Scotland rose in February at its strongest pace for 44 months, according to a new survey.

The Bank of Scotland's purchasing managers index (PMI) found companies in goods production had not been so positive about growth since the survey began 13 years ago.

Recruitment was up for the first time in four months, but at a modest pace and almost entirely in manufacturing.

The jobs picture was also much weaker than figures for the UK as a whole.

Jobs growth was recorded in every region of England for the first time in more than three years.

The bank's purchasing manager's index monitors activity in the manufacturing and service industries on a monthly basis.

Companies reported improved orders, as their clients loosened budget controls.

Although weaker than the UK as a whole, new business growth in Scotland was the strongest it had been for a year.

The cost of input prices for firms was up, notably in food, fuel and cotton. But there was also increasing evidence of that being passed on in higher prices.

These did not rise as much as in January, but firms in Scotland were considered more likely to be increasing prices compared with those in the rest of the UK.

Donald MacRae, chief economist at Bank of Scotland, noted that the recovery continued to be uneven and least robust in the services sector.

"This is a welcome second month of growth in the private sector of Scotland's economy following the winter downturn," he said.

"Recovery was led by manufacturing, with the strongest monthly rise in output since the report's inception in 1998.

He added: "For the first time in six months, performance in Scotland was stronger than that registered for the UK as a whole.

"However, this needs to be maintained throughout the year, not just as the weather improves, but also to counteract the effect of public spending cuts."

Banks responded

Meanwhile, another survey of 100 companies with a turnover of a £1m plus has been commissioned by investment house, Quayle Munro.

The firms were asked for their views on finance and the current banking environment in Scotland.

A total of 56% believed banks had responded to government pressure to lend money.

And nearly three quarters of the companies questioned said they were planning to raise new capital in the next 12 months.

In total, 45% said they expected their terms of borrowing to be about the same as before, whilst 29% thought better terms would be possible and 25% thought terms would be worse.

Quayle Munro's managing director in Scotland, Rob Cormie, said: "This surprising level of confidence and positive financial outlook amongst Scottish business is to be welcomed as a buoyant private sector, investing in the future is crucial to our economic recovery."