Scottish Firms Report Fall in New Orders

08/08/2016 - Demand for Scottish goods and services deteriorated at its sharpest pace for nearly four years last month, according to a survey of purchasing managers.

The latest Bank of Scotland PMI found a sharp fall in new orders for both manufacturers and service providers in July.

Output from the private sector also fell to a four-month low.

However, workforce numbers stabilised during the month, ending a seven-month sequence of job shedding.

The bank's PMI - which measures changes in combined manufacturing and services output - fell from 50.5 in June to 49.2 in July. Any figure below 50 suggests contraction.

Scottish service sector output was "in contraction territory" for the third month in a row, while manufacturers saw production shrink for the first time in three months.

The report said the decline was driven by weak underlying demand for Scottish goods, with respondents also blaming slower export demand.

The decline in new business for service providers was the second-sharpest reported since September 2012.

Moreover, goods producers also recorded a fall in new orders, with the latest decline the sharpest in nearly four years.

The bank said anecdotal evidence suggested that the fall in demand for Scottish goods was partly due to the recent EU referendum.

Graham Blair, from Bank of Scotland, said: "The start of the third quarter was challenging for Scottish private sector firms, as declining demand conditions knocked the economy back into contraction during July."However, it is encouraging to see employment levels stabilise."

Brexit impact

Meanwhile, a separate report by business advisers BDO found Scottish business confidence at its lowest level for more than three years, following the Brexit vote.

The latest Business Trends Report suggested output would fall over the next three months.

The picture for manufacturing was particularly gloomy, with optimism dropping to a four-year low.

However, the report also suggested that the initial impact of the Brexit vote had been "less severe than many anticipated".

It said survey responses indicated that the Scottish economy was "poised between a potential recession and recovery".

Martin Gill, Scottish head of BDO, said: "It was clear that the Scottish economy was cooling before the Brexit vote and that this trend has continued, although perhaps not at as great a rate as was predicted.

"However, the current figures highlight just how great a drop in output and optimism there has been year-on-year and this would indicate a distinct slowing down in economic growth which the Brexit vote appears to have done little to abate."

Source: BBC News