North east firms preparing for upturn in oil and gas industry

Businesses in north east Scotland are preparing for an upturn from the oil and gas slump of the past two years, according to a survey for the Royal Bank of Scotland.

It found a third of businesses, from a sample of 400, saw rising volumes of activity over the winter months.

However, nearly as many saw a fall.

There was a net 10 percentage point gap in the number of firms around Aberdeen and Aberdeenshire expecting growth in volumes over the next six months.

Exports across the Scottish private sector stalled between December and February, despite help from the weaker pound.

Capital investment dropped markedly since autumn, according to the survey. Some 21% of firms reported that new capital investment rose during the winter months, while 29% said it fell.

That net score, of a negative eight percentage points, contrasts with a positive 24 point gap between investment risers and fallers in the previous quarter of 2016.

'Pretty tepid'

The quarterly Royal Bank business monitor, carried out by the Fraser of Allander Institute at Strathclyde University, found inflation pressures were growing on firms, and expected to intensify during this year.

The sector with the strongest showing over winter were financial and business services.

The most positive outlook was found among tourism firms and those in transport and communications, although those sectors also reported that cost pressures were stronger than in other areas of the economy.

Stephen Boyle, chief economist at the Royal Bank of Scotland, said growth looked "pretty tepid", while the main development was rising inflation.

"A combination of the weaker pound, the National Living Wage and a rise in energy prices is pushing up firms' input costs," he said.

"That's starting to show in consumer price inflation and will continue to build over the next few months. How consumers and businesses respond will be central to determining economic performance in 2017."

Prof Graeme Roy, director of the Fraser of Allander Institute, said: "Despite concerns about inflation picking up, firms expect growth in 2017 to be marginally more positive than 2016.

"However, the increase in uncertainty caused by the triggering of Article 50 and the prospects of a second independence referendum will act as a headwind for many businesses."