Headwinds dragging on Scottish economy

Fraser of Allander study shows impact of oil downturn and a fall in exports

Scottish economic activity weakened in the first quarter of the year as the impact of the global oil price downturn dragged on output.

The first RBS Business Monitor, conducted by the Fraser of Allander Institute and including input from 330 Scottish companies, showed export activity also fell in the three-month period.

Just 17% of respondents reported a rise in overseas trade in the period while more than double saw their international sales fall.

It was the fourth consecutive quarter that exports decreased and almost a quarter of the companies surveyed expected the situation to get worse over the coming half year.

RBS Scotland chairman Malcolm Buchanan said the economy was being buffeted but opportunities for growth still existed.

“We’re working hard to support our customers and to help those businesses taking a long-term view of investment for growth,” he said.

“Our work with the Scottish farming community in developing the Bridging Payment Scheme and our ongoing work with our customers affected by the oil and gas downturn reflects our desire to find solutions to issues affecting sectors and individual operators.

The monitor also found that general business volumes were significantly lower, with a reading of -18 being the lowest seen for five years.

A fifth of firms reported an increase in first-quarter sales but a significantly larger group representing 43% of the survey cohort reported a revenue drop.

The balance of -21 was the worst seen since early 2010 and compares with a marginally positive figure a year ago.

RBS chief economist Stephen Boyle said: “These results are disappointing but not surprising.

“Slowing growth in the first quarter has largely been visited on Scotland from outside through a combination of the low oil price and weak export demand.

“Against this backdrop it’s encouraging that firms expect a modest rebound in growth over the next six months.”

Sign of the times: the Rowan Stavanger has spent several months tied up at the Port of Dundee awaiting deployment.