OPTIMISM has increased in key industries in Scotland in recent months with the fall in the pound helping the tourism trade achieve a stand out performance although the retail sector is under pressure a survey has found.
Scottish Chambers of Commerce said the results of its latest quarterly research showed businesses have remained resilient in the face of the significant uncertainty caused by the Brexit negotiations and the fragility of the country’s economy.
The organisation found optimism continued to improve among most Scottish businesses in the third quarter although official figures suggest growth in the economy slowed to a snail’s pace in the preceding three months.
The Quarterly Economic Indicator Survey which is published today provides evidence that tourism firms have enjoyed a surge in business helped by developments on currency markets following the Brexit vote last year.
Scottish Chambers said: “Tourism was a stand-out performer over the third quarter of 2017 due to the weak pound’s effect on foreign holidays.”
The fall in the pound has pushed up the cost of travelling abroad for people in the UK, while making it cheaper for overseas visitors to come to the country.
The survey points to a strong increase in the number of people visiting Scotland from European Union member states and from further afield.
Scottish Chambers found the manufacturing sector benefited from an increase in export orders. This helped support a fourth consecutive quarterly increase in optimism in the sector.
Neil Amner of Anderson Strathern, chair of the Scottish Chambers of Commerce Economic Advisory Group, noted the finance and business services sector recorded strong results with sales and profitability at their highest levels for several years.
However, the survey findings suggest the retail sector is facing big challenges with the quarterly indicators for sales, profitability and cashflow in negative territory.
The fall in the pound since last summer has helped stoke inflation putting pressure on consumer spending.
Mr Amner said: “This continues on from our findings in the second quarter which highlighted persistent issues in the retail sector. Levels of inflation have continued to impact on real terms wage growth, which has maintained pressure on household budgets and translated into recurrent challenges for this sector.”
The increase in optimism recorded by the survey may heighten concern about the challenges posed by current high employment levels in Scotland.
Mr Amner said: “Concerns continue to be raised by our members when it comes to seasonal workers and the attractiveness of the UK to EEA (European Economic Area) migrants during the uncertainty surrounding the Brexit negotiation process.”
Professor Graeme Roy of the Fraser of Allander Institute, which produced the report with Scottish Chambers, warned record high employment levels are leading to recruitment difficulties across most sectors, with implications for growth and costs.
The survey found optimism increased in the third quarter compared with the same period last year in the manufacturing, tourism, financial and business services and construction sectors.
In the retail and wholesale sector a negative balance of 10 per cent of firms were less optimistic than in the previous quarter rather than more confident. A negative balance of 23 per cent were less optimistic in the third quarter last year.
The survey was conducted between 21 August and 14 September. Some 384 firms responded.
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