Scotland's economy starts to stabilise as coronavirus slump slows down
Register for free to read more of the latest local news. It's easy and will only take a moment.
Confidence in the Scottish economy is picking up as the downturn in the nation's economy slows, a new report from the Royal Bank of Scotland (RBS) suggests.
While the economy is still experiencing a downturn as a result of the coronavirus pandemic, this eased noticeably in July.
This is a clear sign the economy is approaching stabilisation, the report suggests.
The seasonally adjusted Royal Bank of Scotland Business Activity Index, which measures combined manufacturing and service sector output, registered 49.3 in July, rising noticeably from 37.1 in June, and signalled the softest fall in private sector output since the downturn began in March. Similarly, new business declined only fractionally, while the 12 month outlook for activity strengthened to a five month high.
However, there was a wide difference in sector experience with manufacturing order books rising solidly, while services firms registered a fifth successive reduction in new work.
Despite the continued downturn, confidence in economic activity for the year ahead remained positive for a third consecutive month in July and strengthened to a five-month high. Anecdotal evidence linked optimism to hopes of an economic recovery once lockdown measures are lifted, with many respondents expecting the release of pent-up demand to drive sales.
Private sector employment levels are still continuing to fall as a result of temporary business closures and weak customer demand conditions, but the rate of job losses was the slowest since February.
Malcolm Buchanan, RBS's Scotland board chairman, believes the study has a highlighted some positive signs as the Scottish economy stabilises.
“There were further reductions in activity and inflows of new business, but the declines were the softest since March and only slight, with some respondents noting that looser Covid-19 related restrictions had resulted in slightly improved demand conditions," he said.
"Firms also remained optimistic with regards to output over the coming 12 months. Confidence was the highest since February, with panellists linking positive expectations to hopes of an economic recovery."
However, he warned that although July's figures were a step in the right direction, the Scottish economy was yet to see any growth and a possible second wave of the pandemic, bringing with it the reintroduction of lockdown meaures, as seen in Aberdeen, had the potential to derail any further moves towards a recovery.
Meanwhile, another recent study has warned that Scotland will continue to experience job losses for some time.
New research from the CIPD (Chartered Institute of Personnel and Development ) and recruitment agency the Adecco Group found that almost a third of Scottish organisations (32 per cent) expect to cut jobs in the third quarter of 2020.
This shows a notable increase from 19 per cent three months ago.
The study found that 41 per cent of Scottish organisations plan to take on new staff this quarter, remaining well below levels seen in previous years.
Lee Ann Panglea, head of CIPD Scotland and Northern Ireland, commented: “This is the weakest set of data we’ve seen for several years. Until now, redundancies have been low – no doubt due to the Job Retention Scheme – but we expect to see more redundancies come through this autumn, especially in the private sector once the scheme closes.
"It is concerning to see low hiring confidence in Scotland, especially considering the rise in planned redundancies. As a result, this looks set to be a sombre autumn for jobs.”
Click here for more business news
