The latest Scottish Chambers of Commerce (SCC) Quarterly Economic Indicator survey, in partnership with the Fraser of Allander Institute, for Q3 of 2019 was published today.
Summary
The Survey shows that businesses continue to struggle due to factors caused by Brexit uncertainty in the most recent quarter. Confidence remains on a downward trend in most sectors compared to the same period last year. Yet businesses, particularly in the financial and business services sector, are cautiously optimistic that a positive outcome to Brexit on 31 October could start restoring confidence in the Scottish economy.
You can read the full report here: https://www.scottishchambers.org.uk/wp-content/uploads/2019/10/SCC-Quarterly-Economic-Indicator-Q3-2019-Report.pdf
Comment
Scottish businesses appear to be treading water as they await clarity on the terms of the UK’s exit from the EU.
Following last month’s data which showed that the Scottish economy contracted in the three months to June, this survey provides a more up-to-date picture of underlying trends within Scotland’s business community.
Overall, activity appears to be broadly flat over Q3 in most sectors.
The one exception is in manufacturing which continues to be buffeted by ongoing Brexit uncertainty and the slowdown in the global economy. Total new orders are at the lowest level in 10 years, whilst export orders fell for 4 in 10 exporting firms.
Financial and business services has once again had a strong quarter with positive results across the board.
The data suggests that Scotland should avoid a ‘technical recession’ – defined as two consecutive quarters of negative growth – when the next set of official figures are released later on this year.
However, growth remains fragile and investment levels remain weak. In construction, investment is at its lowest level in more than 5 years.
A ‘no deal’ Brexit remains the greatest immediate risk to the Scottish economy. It is misguided to argue that ‘no deal’ is better than further delay. A ‘no deal’ would not only act as a major economic shock but will do little to curb uncertainty, with the UK’s future relationship with the EU still needing resolved.
At the same time, some of the commentary around the scale of possible impacts of a ‘no deal’ are likely to be over-the-top. Not all of the recent challenges in the Scottish economy can be blamed on Brexit. Growth has remained below trend for over a decade.
The fact that this performance is not a more significant source of debate at Holyrood remains surprising.
Authors
The Fraser of Allander Institute (FAI) is a leading economy research institute based in the Department of Economics at the University of Strathclyde, Glasgow.