Business growth continues but forecast exports worsen, report shows

Scottish economic growth continued in the final months of 2018 but fewer than one in five businesses expect to increase exports, a report has found.

The latest Scottish Business Monitor from Strathclyde University’s Fraser of Allander Institute, covering October to December, indicates the total volume of business rose for 35% of Scottish firms covered by the monitor in this period.

This gives a 10% net balance of firms indicating growth, down six percentage points on the previous quarter.

But the report also found the outlook for export activity had worsened with less than 20% of firms forecasting growth.

Less than 20% of firms plan to increase capital investment, with a net balance of -4% of businesses planning to do so, a rise of seven percentage points on the previous quarter.

Weakening demand remained a major concern, with 80% of respondents worried about this, a 4% rise on the previous three months.

More than half of firms (52%) were concerned about exchange rates, down 1% on the previous quarter.

Mairi Spowage, the institute’s head of economic analysis, said: “This latest FAI Scottish Business Monitor shows that the Scottish economy continued to grow in the final few months of 2018.

“Our headline FAI Business Activity Index slipped a little from a net balance of 16% in Q3 to 10% in Q4.

“And whilst this is above the long-term series average, it is lower than businesses were expecting just three months ago. Small businesses appear to be the most gloomy.

“Also of concern is the fact that businesses in Scotland are reporting not just a decline in investment – as has been the case now since early 2017 – but also a modest fall back in export activity.

Institute director Graeme Roy added: “Scottish businesses appear to be remaining relatively resilient to the ongoing political uncertainty.

“But they will be awaiting next week’s Brexit vote with trepidation. Through no fault of their own, many Scottish firms are simply unprepared for a disorderly Brexit.

“Whether you agree or disagree with the decision to leave the EU, a smooth transition is vital.

“The potential disruption to trade patterns, supply chains and basic economic infrastructure mean that a ‘no deal’ outcome must be avoided.”