THE Scottish economy is continuing to grow – but at a slower rate than before – according to a new report from Lloyds TSB Scotland.
The bank's business monitor for the three months to the end of February reveals that the global credit crunch has not sent spending and businesses into reverse north of the Border.
Lloyds says it expects growth in 2008 to be near Scotland's long-t
erm growth rate for the past ten years.
The report adds that business expectations for the next six months have improved and there is no evidence of restriction in credit or rising levels of concern about credit costs in the coming half-year.
This comes a day after the CBI said it expected the UK economy to grow by just 1.8 per cent in 2008, down from its previous forecast of 2 per cent.
According to the Lloyds survey, 36 per cent of firms reported an increase in turnover, while 28 per cent pointed to a decrease. The net balance of 8 per cent is down from the previous quarter and less than a third of that a year earlier.
The slowdown is affecting both manufacturing and services businesses, with the former reporting a net balance of 5 per cent and the latter 9 per cent.
In contrast, expectations of increasing turnover in the next six months have improved, rising to 23 per cent, up on the 17 per cent of the previous quarter.
With a net balance of 26 per cent for production businesses compared with 21 per cent of services, there is a higher level of optimism in the manufacturing sector.
Professor Donald MacRae, chief economist of Lloyds TSB Scotland, said consumer confidence in Scotland had remained robust, backed up by recent figures showing strong retail sales.
He said: "Scottish economic growth is slowing from the latest annual underlying growth rate of 2.1 per cent.
"Claimant unemployment at 2.5 per cent is the lowest for 33¼ years. House prices in Scotland continue to increase year-on-year but at a reduced rate."
He added: "Although this business monitor has recorded a slowing in the Scottish economy at the end of last year and the beginning of 2008, business expectations for the next six months have improved. There is no evidence of restriction in credit or rising levels of concern about credit costs. Costs overall are, however, a concern for most Scottish businesses.
"After above trend growth in 2007, the Scottish economy is facing reduced growth in 2008 nearer to its long-term growth rate."
The business monitor, which is in its tenth year, has recorded a growing importance being placed on staff availability. But for the second quarter in succession, these concerns have reduced, with profit margins the biggest worry for most companies.
The full article contains 470 words and appears in The Scotsman newspaper.
