Scottish economic expansion 'set to continue in 2015'

Scotland's economy finished 2014 on a "solid footing" and will continue to expand in 2015, according to a report.

A monthly survey by the Bank of Scotland found employment and business output grew in December, continuing at the same rate as the previous month.

However, it forecast that economic expansion in 2015 would be at a slower rate than last year.

The bank's Purchasing Managers' Index (PMI) collects information from about 600 manufacturing and services firms.

The growth of new business during December was found to be joint-fastest in the past five months, while employment continued to rise at an unchanged rate from November - remaining among the fastest in the survey's 17-year history.

New export orders at manufacturers continued to fall but at a slow rate, the report said.

Export 'challenges'

Bank of Scotland chief economist Donald MacRae said: "December's PMI was 52.8, indicating solid growth in the final month of last year.

"Both manufacturing and services sectors employed more people and experienced welcome increases in the level of new orders.

"However, new export orders fell for the 10th time in 11 months, confirming the challenges of exporting to the largely stagnant eurozone economies.

He added: "The Scottish economy continued to recover in the second half of 2014 and looks set to expand during 2015, but with growth easing compared to the high levels of the first six months of 2014."

The report suggested both the services and manufacturing sectors employed more people in December

The report was welcomed by the Scottish government.

Deputy First Minister John Swinney said: "With further improvements in economic conditions expected this year, this should bring opportunities for business and greater financial security for households across the country.

"Whilst the survey highlights that conditions for exporters remain challenging - particularly with continued weakness in some of Scotland's key export markets - the PMI still points to a solid end to 2014."

'More encouraging news'

Responding to the Bank of Scotland report, Scotland Office Minister David Mundell said it provided "more encouraging news for Scotland".

He added: "Employment levels have risen among the fastest in the 17-year survey history and private sector business activity continues to rise solidly.

"Against a backdrop of a struggling eurozone economy and oil prices in steep decline, the fall in export orders show challenges remain for our businesses."

Scottish Labour finance spokeswoman Jackie Baillie said: "We welcome this new report but we should also be aware that the falling price of oil has yet to be fully felt, particularly in the economies of the north east of Scotland.

"The oil crisis is the biggest threat to Scottish jobs since Ravenscraig and unless the Scottish and UK governments get a handle on the crisis, there will be huge knock-on effects."

'Confidence cocktail'

Meanwhile, a separate economic report has predicted that a "confidence cocktail" is brewing, with low inflation, falling costs, solid jobs growth and rise in real wages among Scottish businesses.

The BDO Optimism Index, which tracks how businesses expect orders to develop over the near term, found that confidence rose to a new quarterly high in December.

However, the report also urged caution over the continuing fall in oil prices and the effect it would have on the North Sea industry, and potential business uncertainty around the general election in May.

Martin Gill, head of BDO in Scotland, said: "This is a positive start to the year although I would urge caution on being too optimistic on a single month's results."