Review of Scottish business surveys [June 2011]

Lockyer, Cliff and Malloy, Eleanor (2011) Review of Scottish business surveys [June 2011]. Fraser of Allander Economic Commentary, 35 (1). pp. 30-33. ISSN 2046-5378

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The effects of the harsh winter weather were a common theme in most business surveys covering the first quarter of 2011, with a number of surveys suggesting the Scottish economy to all intents stalled in the first quarter, although with some pick up in activity from February onwards. Surveys covering manufacturing reported rising demand, activity and limited employment growth, although Oil & Gas UK noted a sharp downturn in longer term activity as a consequence of the increase in the Supplementary Tax charge in the sector. A general theme in the surveys covering the first half of 2011 are the rising cost pressures, rising raw material and energy costs and, especially in retail and tourism the impact of inflation and consumer uncertainty on sales trends. Surveys covering construction reported declining business optimism, pressures on margins and escalating cost pressures. The Scottish Chambers’ Business Survey (Q 1 2011) noted that once again for manufacturing firms raw material/suppliers prices (86%) and transport costs (65%) were the most widely reported cost pressures and for firms these pressures are now more evident than in previous quarters. More than three quarters of manufacturing, 93% of wholesale and 76% of retail respondents reported pressures to raise prices due to rising raw material/suppliers’ prices. Firms are reporting increasing transport costs with 86% of wholesale, 65% of manufacturing and 67% of retail respondents reported rising costs. Labour market activity remained largely subdued, although recruitment activity in construction improved. Recruitment difficulties remained at low levels. Pay increases ranged from 2.13% in wholesale to 5.4% in tourism, no construction firms reported increasing wages in the first three months of 2011.