The Scottish Government will take steps to ensure Scotland is as “resilient as we can possibly be” in the face of global economic uncertainty, First Minister John Swinney has said.
Responding to the events of the last few weeks, the First Minister has called for a UK Government response that reflects the fact that “the world is changing around us”.
First Minister John Swinney said: “I know that this is a time of great uncertainty for people, that many families and businesses are worried about what global events will mean for their finances. That is why I want us to be united and creative in our response, to ensure that we are as resilient as we can possibly be.
“My view is that UK response should include removing the self-imposed economic straitjacket of the Chancellor’s fiscal rules and reversing the job – and growth – destroying increase in employers’ National Insurance contributions. The world is changing around us and quite simply, the UK government needs to change too.
“It should include closer alignment with the European Union. If trade barriers are being constructed across the Atlantic, they must be swept away in the Channel and North Sea.
“And it should include investment in Scotland’s green industrial future. If British Steel is to be nationalised to protect it, then so too should Grangemouth.
“If a supercomputer is to be built in the London-Oxford-Cambridge triangle, then the cancelled supercomputer for Edinburgh should be restored.
If carbon capture and storage is to proceed on Tyneside and Merseyside, it should be given an immediate green light for the north-east of Scotland too.
“This is what it means to get serious about Scotland’s economic future. Given the scale of the threat, anything less is not good enough.”
Scottish SecretaryIan Murray MP said: “The SNP were told a decade ago that the Grangemouth refinery would close. They and the Tories did nothing. 3 years ago they could have intervened but nothing.
“Labour win in July and suddenly the SNP want to pass blame. Total charlatans. If they truly cared they’d have done something, anything – but ZERO.
UK Government must “meet the moment” with decisive action
First Minister John Swinney has called for a new package of support for industry from the UK Government in the face of global economic uncertainty.
As financial markets react to global events, Mr Swinney has called on the Prime Minister and the Chancellor to change their fiscal rules and commit to a package of investment to support business, workers and consumers.
The First Minister said: “We are currently enduring a time of global financial and economic uncertainty and volatility. But while we are not immune to global trends, we can be confident in the strength of Scotland’s economy.
“Indeed, throughout my time in the United States since last week, there has been a clear confidence in Scotland as a place to do business and as a destination for investment.
“However, the global economy is clearly going through a time of upheaval and it is vital that we see strong action to meet the moment, support Scottish industry and ensure workers and consumers are protected.
“My government will continue to do everything in our power to do that, but given where powers over the economy sit, this will require clear, determined and decisive action from the UK Government.
“The old economic orthodoxies of Westminster will not be enough to meet a moment of real global challenge. The UK Government cannot meet this global uncertainty with austerity – we need to see a new approach which provides investment and support for industry as we are seeing in countries like Spain.
“It is now obvious that the era in which the UK Government’s fiscal rules were set is over. The Prime Minister and the Chancellor must accept that new reality, end their outdated commitment to the fiscal rules and deliver serious investment to support industry.
“And in the face of this economic volatility, the last move any serious government would implement is a tax on jobs. The increase in employer’s national insurance contributions was always the wrong move – but the Prime Minister should not risk further economic damage by making it more difficult for business to take on or keep staff. The Chancellor should abandon the national insurance hike immediately.
“The events of the last few days require truly bold action from the Prime Minister. He cannot simply respond to an unprecedented situation by continuing with a plan set in completely different circumstances and which already looks doomed to failure.”
Output expands fractionally amid renewed drop in sales
Softest increase in employment since April 2021
Price pressures cool, but remain rapid
Business activity across the Scottish private sector increased at only a fractional pace during July, according to the latest Royal Bank of Scotland PMI® data.
The seasonally adjusted headline Royal Bank of Scotland Business Activity Index – a measure of combined manufacturing and service sector output – registered 50.2 in July, down from 54.4 in June, signalling the weakest rate of growth in the current 17-month run of expansion.
Moreover, new business at Scottish private sector firms fell for the first time since March 2021. Sector data showed that weakness generally emanated from the manufacturing sector, though service providers in the region saw rates of growth for both output and new orders weaken since June.
Private sector firms across Scotland signalled a renewed fall in new orders during July. While the rate of reduction was only mild, it marked the first contraction since March 2021. The respective seasonally adjusted index was pulled down by a sharp reduction in factory orders across the region, while a weaker upturn in sales was seen at service providers. Panellists linked the decline to reduced customer spending amid the cost of living crisis and rising economic uncertainty.
In contrast to the contraction observed in Scotland, the UK as a whole reported a modest expansion in new orders.
Business confidence strengthened marginally across Scottish private sector firms in July. Surveyed companies hoped that new customers and improvements in client spending will lead to expansions in activity in the coming 12 months. Nevertheless, the overall degree of optimism was the second-lowest in 21 months, with a number of firms concerned about the challenging economic climate, the cost-of-living crises and potential recessionary risks.
Additionally, Scottish private firms were less upbeat than the average UK business.
As has been the case since April 2021, Scottish private sector firms raised their employment levels in July. Although the rate of job creation was the slowest in 15 months, it remained stronger than the series average (50.5).
Companies that raised their workforce numbers attributed this to higher business requirements, but firms also highlighted difficulties finding staff amid labour and skill shortages and a competitive labour market.
Of the 12 monitored UK regions, Scotland reported the softest increase in staffing levels in July, while the North East of England was the only region to register job losses.
Levels of outstanding business fell across Scottish private sector firms for the second consecutive month in July. The rate of depletion was broadly unchanged from June and modest, as the quickest decline in manufacturing backlogs in over two years was largely offset by a renewed rise in unfinished business at services companies. Firms primarily stated that lower sales drove the latest reduction in outstanding orders.
Nine out of the 12 monitored UK regions, including Scotland, posted a decrease in work-in-hand, with data signalling easing pressures on capacity across the UK as a whole.
Input costs rose sharply across Scottish private sector firms during July, thereby stretching the current bout of input price inflation to 26 months. The rate of increase eased to a five-month low, but remained amongst the fastest on record. According to surveyed businesses, higher commodity prices, Brexit, and the war in Ukraine had all placed upwards pressure on costs.
The pace of cost inflation in Scotland was slightly faster than that observed across the UK as a whole.
For the twenty-first successive month, private sector firms in Scotland raised their charges for goods and services in July. While the pace of increase softened to a seven-month low, it remained sharp overall and was quicker than the historical average. Firms often mentioned raising their prices in line with higher costs of raw materials and energy.
Of the 12 monitored UK regions, only the East of England saw a softer increase in charges than Scotland.
Source: Royal Bank of Scotland, S&P Global.
Malcolm Buchanan, Chair, Scotland Board, Royal Bank of Scotland, commented: “The Scottish private sector lost growth momentum for the third month running during July.
“Activity levels were broadly unchanged as the post-pandemic rebound continued to fade and firms faced intense cost pressures and greater economic uncertainty. Manufacturing firms in the region noted sharp declines in production and new orders, while service providers reported only mild expansions in activity and sales.
“Encouragingly, employment continued to rise, extending the current period of job creation to 16 months. That said, the rate of payroll growth was the softest seen since April 2021.
“While there were signs that price pressures have peaked, costs continued to rise sharply overall. Along with signs of weakening demand, an uncertain economic outlook and the cost of living crisis, a number of firms expressed concerns around the outlook and fears of a recession in the year ahead.”
