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Scotland’s economic growth – back to business as usual?

By Liz Cameron - Posted on 18 October 2013

Scottish Chambers of Commerce Chief Executive, Liz Cameron, casts a critical eye on the economic recovery to ask: is Scotland back in business?

Having weathered the storm through what is increasingly looking like one of the worst economic downturns in recent history,Scotland looks like she is back on the right track. Having employed hard work, imagination and tenacity in spades, our businesses have come through stronger.

According to The Scottish Chambers of Commerce’s latest Quarterly Business Survey, produced in partnership with Strathclyde Business School’s Fraser of Allander Institute, overall business confidence has improved with most sectors showing positive signs of sustained economic growth.

It’s good news of course, but it should be tempered with a dose of realism – we’re not back to pre-recession levels of output yet, and the growth that there is, is built largely on consumer demand: the most fragile of bases.

While the manufacturing sector has seen orders rise at the highest rate since 2007, with most of those asked reporting an increase in total orders (a net balance of 16.7%), construction respondents also reported good news with a rise in investment intentions. Taken together with the long-term decline in retail sales coming to a long-overdue end, with the first positive net balance (2.1%) since the end of 2006, things are looking good.

However, there are always two sides to the story and economic vulnerability remains.

The construction sector is still making slow progress with a 3.7% fall in business confidence since the previous quarter. Rising costs of raw materials and transport are also having an effect on the sector, with many pointing to these as reasons for squeezed margins and poor cashflow.

For a country which is reliant on consumer spending, falling household incomes as the result of the ever growing gap between wage and price inflation should also be concerning.

So what’s the solution?

For business confidence and optimism to continue to fuel recovery, it’s essentialUKand Scottish Government rhetoric on investment growth becomes reality. For things to really change in a sustainable fashion, the public and private sectors must work together.

With little confidence in exports (just 1.3% of net manufacturing respondents expected export growth) there needs to be a clear focus on growing international trade.

While the Scottish Government must continue to invest in supporting businesses with international ambitions, the UK Government should be looking at removing unnecessary barriers to growth such as the abolition of the Air Passenger duty. This step could free up opportunities for export and inward investment and promote sustainable growth because without strong foundations, this recovery will falter.

Are we on the road to recovery? What more can government do to promote businesses’ sustainable growth? Let us know your comments below…

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