Scotland forecast to lose 38,000 jobs

SCOTTISH companies are shedding jobs at the fastest rate in more than a decade, casting an even greater shadow over the economy north of the Border.

In a bleak assessment of the country's private sector, Royal Bank of Scotland's latest Purchasing Managers' Index (PMI) – published today – also reveals a drop in output and order activity as companies struggle with the credit crisis and soaring costs.

The survey's employment index posted a reading of 45.7 – down from 47 in August and the lowest since the PMI series began in January 1998. Today's report comes as small businesses in Scotland highlight worsening trading conditions as they face a "double whammy" of rising costs and loss of customers.

Just over half of SMEs in a survey released today by BT said that conditions had deteriorated over the summer. The 54 per cent figure was the joint-highest in the UK.

RBS, whose report is based on the findings of 600 companies polled by Markit Economics, said the job losses reflected widespread lay-offs, natural wastage of staff and the postponement of planned company expansions.

Yesterday, a leading economist predicted that 38,000 jobs could go in Scotland over the next year as a result of the economy's exposure to the banking and finance sectors. Charles Davis, economist for the Centre for Economics and Business Research (CEBR) calculated that unemployment north of the Border would rise from 112,000 to 150,000.

According to the PMI report, business output fell in both the manufacturing and service sectors, with the latter reporting the steepest decline. Firms surveyed said that continued falls in the level of incoming business had been the primary driver in the decline, although new business wins contracted at the weakest rate in three months.

The overall output index for September registered 43.1, an improvement on August's 41.9. Any figure below the 50 "no-change" mark denotes contraction.

Meanwhile, prices rose for the 16th consecutive month as soaring input costs hit businesses.

David Fenton, head of micro-economics for RBS, said: "The global financial crisis entered a turbulent new phase in September, which had a predictable effect on the tone of the September report.

"Business activity fell again, though the rate of decline was less severe, which hopefully marks the beginning of a more stable period for the activity index."

He added that he expected this month to be more upbeat, boosted by government and central bank measures to stem the financial rot.

The BT Business survey showed that small firms in Edinburgh were marginally more upbeat than those in Glasgow – with 47 per cent reporting worsening conditions, compared with 56 per cent in Scotland's biggest city. But 66 per cent of small firms in the capital said costs had increased, against 63 per cent in Glasgow and a 57 per cent in the UK.

City employment levels to plunge

SOME 62,000 City jobs will have been axed by the end of 2009, taking employment in the Square Mile back to levels last seen a decade ago.

Research from the Centre for Economics and Business Research (CEBR) revealed that 28,000 jobs are likely to be shed in 2008, while a further 34,000 will go in 2009.

The report claimed that corporate finance is likely to be the worst hit sector and is likely to lose about half of its 15,000 workers over the next two years as a result of consolidation and fallout from the financial crisis.

The CEBR added that derivatives is also set to take a heavy knock, with employment levels decreasing by 46 per cent.

Today's report claimed that the total number of people employed in the City will drop to 291,000 in 2009 – down from 2007's level of 353,000. Richard Snook, senior economist at CEBR, said: "The credit crunch has spiralled in to the worst financial crisis since the 1930s. It has spread through global markets like a virus and threatens to plunge the world into recession.

" The City will be hard hit; we expect it will set back by a decade, with 62,000 jobs lost of the next two years."