Scottish economy 'just in growth'

The research indicated "challenging" conditions for the oil and gas industry

Scottish firms have seen growth remain "in low gear" at the start of the year, according to the monthly survey of managers for Bank of Scotland.

It found jobs were being shed in both services and manufacturing, partly due to the long-awaited rise in pay rates.

Another survey of business confidence, published on Monday, found it at a three-year low.

And it found that managers were evenly split over whether growth would have slowed six months from now.

But a further poll of about 50 Scottish senior business leaders for Grant Thornton accountants found them to be more upbeat, planning more recruitment and salary rises.

The purchasing managers index (PMI), by Markit for the Bank of Scotland, was just over the 50 mark in January, below which it indicates contraction.

At 50.3, the same figure as December, it continues a significant lag on the equivalent UK survey, which rose to 56.1.

New orders

The UK figure has been above 55 for the past six months, while the Scottish index fell into a contraction in output in September and November.

The most positive finding of the Scottish PMI survey of about 600 firms was in a slight improvement in the number of new orders being placed. That has been on the rise for the service sector since last March.

Manufacturing has continued to struggle, with signs of contraction in every indicator surveyed. Managers reported another sharp drop in the backlog of work. That is not seen as a healthy sign.

The PMI showed, for the first time in 17 years, that input prices for private sector firms have stalled, partly reflecting the decline in energy prices. Output prices have continued a six-month decline.

Accountancy firm BDO commissions a different, regular survey of business confidence, carried out by the Centre for Economic and Business Research.

'Challenging conditions'

Firms in Scotland told surveyors that confidence levels had reached a three-year low.

Looking six months ahead, managers were evenly split over whether growth would be sustained at trend rates.

The firm said this was not surprising, as managers reflect on the slowdown in Asia, the low oil price, particularly affecting the north-east, and uncertainty over Britain's place in or out of the European Union.

On the PMI survey, Alasdair Gardner, of the Bank of Scotland, said: "Growth in Scotland's private sector remained in a low gear during the first month of 2016 as service providers continued to outperform their manufacturing counterparts.

"Challenging market conditions in the oil and gas sector allowed for only a slight rise in incoming new business levels while job shedding accelerated to a six-month high.

"Firms reported a further lack of pressure on capacity throughout the private sector, yet this was not enough to halt the current upturn in the Scottish economy."