Scotland economy cheer, odd reaction to SNP's Humza Yousaf

This purchasing managers’ index (PMI) report from Royal Bank of Scotland showed employment growth had resumed in the manufacturing sector north of the Border in February, while accelerating in services. This is encouraging, with an eye on the outlook, particularly given manufacturing activity fell again in February. And the pace of decline of manufacturing activity in Scotland eased between January and February, which is another positive.

The overall rate of job creation in Scotland’s private sector economy accelerated in February to its fastest pace for nine months.

And February was the 13th consecutive month in which private sector employment growth has been recorded north of the Border.

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Furthermore, the pace of increase in staffing in Scotland last month was significantly faster than that in London, which was in second place in the league table for employment growth among the UK’s nations and regions.

Scotland was ranked eighth among the 12 UK nations and regions for its growth in business activity in February.

However, it was good to see a second consecutive month of growth north of the Border, and an acceleration of expansion during February.

Scotland was ahead of south-west England, Yorkshire and Humber, north-east England, and Wales, which all recorded declines in business activity last month.

In these most difficult of times, the key thing is that Scotland’s economy is growing again.

And we must not forget the context. The overall UK economy tumbled into recession in the final three months of last year with a second consecutive quarterly fall in gross domestic product.

Judith Cruickshank, who chairs Royal Bank’s Scotland board, said of this week’s PMI report: “The latest expansion across the Scottish private sector was heavily reliant on the service sector, while goods producers failed to perform under the weight of a worsening demand climate.”

This highlights the challenges facing Scotland’s private sector economy.

However, we must bear in mind that the economic fortunes of Scotland are inextricably linked to those of the UK as a whole, which does not have its troubles to seek.

The International Monetary Fund forecasts the UK economy will this year record the second-weakest growth among the Group of Seven leading industrialised nations.

The UK is expected by the IMF to expand by just 0.6% in 2024, only marginally ahead of the 0.5% growth forecast for Germany.

Brexit, of course, continues to weigh heavily on the economy in Scotland and throughout the UK.

Economists at heavyweight US investment bank Goldman Sachs noted recently that real GDP in the UK had fallen short of that of similar countries by around 5% since the 2016 Brexit referendum. This is a very big amount.

READ MORE: Scotland tops table of 12 UK nations and regions

It is also crucial to remember the Scottish Government does not really have any major economic levers.

Contemplating the outlook, as she commented on a PMI survey showing continued growth in Scotland’s services sector but another (albeit reduced) decline in manufacturing, Ms Cruickshank observed: “The recent expansion in employment across both the sub-sectors alludes to more balanced growth in the coming months."

This is good news.

So too, obviously, is the strong employment growth reading for Scotland.

That said, the reaction on social media platform X to First Minister Humza Yousaf’s post about Scotland topping the UK employment growth table, in which he flagged an article from The Herald on the Royal Bank PMI survey, gave the impression that many people were determined not to celebrate this news. That is to put it mildly, with some of the responses signalling fury.

Given the fairly steady stream of views from some quarters that Mr Yousaf is not delivering on his “New Deal for Business” pledge, the positive news on employment growth might have come as a surprise to many.

So too might a survey published late last month by Bank of Scotland showing business confidence in Scotland is the highest among all the UK nations and regions.

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It is worth noting the Royal Bank PMI survey paints a different picture of business confidence in Scotland relative to that in other parts of the UK.

Confidence across Scotland about the prospects for increased business activity on a 12-month horizon in the PMI report was the second-weakest of the 12 monitored UK nations and regions in February, with only north-east England recording weaker sentiment. That said, even in this survey, optimism about the year-ahead outlook from companies in Scotland rose to an 11-month high in February.

In the Bank of Scotland survey, companies in Scotland reported sharp rises in confidence about both their own business prospects, with this balance up 11 points to 68% month-on-month in February, and the wider economy, with this reading up 19 points to a net 46%.

Taken together, this gave a headline confidence reading of 56% for Scotland, up from 42% in January and the highest recorded in the UK in February.

The confidence balances are calculated by subtracting the percentage of firms that are negative about the outlook from the proportion of companies that are positive, with readings on a scale of between -100% and 100%.

Overall business confidence in the UK as a whole went in the opposite direction to that in Scotland, dipping by two points month-on-month to 42% in February, according to the survey from Bank of Scotland and owner Lloyds Banking Group.

Paul Gordon, managing director for small and medium sized enterprises and mid-corporates at Lloyds Bank’s commercial banking division, noted the UK reading was nevertheless high by recent standards.

He said: “For the second consecutive month we’ve seen businesses display a level of confidence that sets a positive outlook for the year ahead - the 42% reported this month aligns with the highest level we saw in 2023.”

This comment underlines the strength of the reading for Scotland, which is 14 points higher than that for the UK as a whole.

And this, as well as the strong private sector employment growth north of the Border reported in the PMI survey, should surely be celebrated by people in Scotland across the political spectrum.

Sadly these days, however, it seems some would, seemingly as a result of whatever particular political views they might hold, rather see weakness when it comes to the Scottish economy.