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Scottish Retail Consortium

The Atrium in Jenners

Reports out this week show that growth in Scotland’s private sector had slowed by the end March. The bad weather, which lasted in April, also hit the high street badly, with shops showing a 7% drop over the year.

Professor Donald Macrae Bank of Scotland

Professor Donald Macrae
Bank of Scotland

The latest report from the Bank of Scotland‘s Purchasing Managers Index (PMI) does show that the private sector economy expanded last month, but only modestly and more slowly than the rest of the UK. Growth in Scots manufacturing continued to rise for the fourth month in a row but at a slower rate than before. There was no change at all in the volume of exports. However, it wasn’t all bad news — the PMI reported that companies were creating jobs in March at the fastest rate in eight months; even manufacturing businesses were recruiting extra staff though at modest rates.

Professor Donald MacRae, chief economist at the Bank of Scotland, pointed out that “the level of new business rose, accompanied by an increase in the number of jobs in both manufacturing and service sectors. But export activity was unchanged in the month. Input-cost inflation was marked across all sectors. The PMI has now been above the no-growth level of 50 for six consecutive months, suggesting the Scottish economy is continuing its slow recovery from recession.”

The PMI is made up from monthly replies to questionnaires sent to purchasing executives in about 600 manufacturing and service sector companies around the country. Anything above 50 represents growth; 50 means no change while anything below that figures suggests economic contraction. It registered at 51.1 for March, down from the 52.5 recorded for February.

Meanwhile, a separate report from the Scottish Retail Consortium says that the bad weather was responsible for a 3.8% drop in footfall in Scots shops, compared to this time last year. However, it also suggests that the position in Scotland was better than the rest of the UK where numbers fell even more sharply. It shows that the worst affected were retailers on the high street (down 7% on the year), while shopping malls showing a much smaller decline.

Fiona Moriarty Director, Scottish Retail Consortium

Fiona Moriarty
Director, Scottish Retail Consortium

According to the Scottish Retail Consortium’s director, Fiona Moriarty, “The coldest March for 50 years was to blame for putting off many Scottish shoppers, and measures up particularly badly against the much milder weather we had during the same month in 2012. Scottish footfall was above the UK average, but that makes it the second best of a bad bunch in a month when no areas showed growth. Retailers in Scotland will be hoping that the late onset of more Spring-like weather makes shopping trips and seasonal ranges more appealing to customers.”

The survey is compiled for the Retail Consortium by the consumer analysts, Springboard. One of its directors, Diane Wehrle, suggested that media attention around the Budget and benefit reforms had hit consumer confidence. However she pointed out that the final week of the month “…did yield some positive results, with retail park footfall significantly bolstered. Home-owners took advantage of the long Easter bank holiday to visit DIY out-of-town outlets. It’s key to bear in mind that March 2013 was much colder than in 2012, where most of the UK experienced unseasonable soaring temperatures, whereas rain, snow and bitter cold further encouraged shoppers to stay at home.”

The latest sales figures from Scotland’s shops show a third consecutive month of growth in February — but only just. The Retail Sales Monitor, from the Scottish Retail Consortium (SRC) and its advisers KPMG, showed that total sales were up 0.7% this time last year. However, like-for-like sales fell by 0.1% and, taking inflation into account, sales were down 0.3% in real terms. Nonetheless, SRC believed the results gave grounds for “cautious optimism”.

David Martin, the SRC’s Head of Policy, described it as “an encouraging result with February being the third consecutive month of Scottish sales growth and the best three-month average in nearly two years. David McCorquodale KPMGHowever, total sales didn’t measure up well against those in January and in real terms were down 0.3%. This reminds us that the economy and trading environment remains fragile. Non-food sales continued to rebound in February, showing the strongest performance since March 2012 if pre-Christmas trading is excluded. Electricals drove much of this growth but furniture and flooring also did well.”

The authors of the report suggest that a broader upturn was now possible. In the view of David McCorquodale (right), Head of Retail at KPMG, “February’s performance delivered a third consecutive month of growth for the Scottish retail sector, which will give retailers reasons to feel fairly upbeat as we head into spring. Retailers will now be hoping for an even stronger March, buoyed by Mother’s Day and Easter falling in the same month. The hope is that next week’s budget will deliver a fillip to stimulate consumer spending in the long-term, and provide a much needed boost to the sector.”

However, the performance of Scottish retailers continues to lag behind the rest of the UK. As David Martin explained, “The gap between Scottish sales growth and that for the UK as a whole widened again in February returning to what has been the norm for around two years. All in all, however, this is a satisfactory showing and should be welcomed with cautious optimism.”

The crofters of Raasay are furious. They have lost the shooting and fishing rights on their island to the highest bidder, a stalking firm from South Ayrshire. The eleven crofters say they have spent the last 18 years carefully building up their business – managing the deer population, investing in refrigeration facilities, establishing a wholesale trade in venison and catering for sporting parties. And now the magic carpet has been pulled from under their feet by the government, all because they came a few quid short in the new-fangled tendering process.

They’ve accused ministers of behaving as badly as the old absentee landlords. And this on the home soil of island champions like Sorely MacLean the Gaelic poet and Calum MacLeod the man who build his own road by hand, because the Council refused to do so. Incidentally, the two mile road, 50 years old, is now falling into disrepair, another sign of absentee landlordism perhaps.

The shooting rights issue broke surface in parliament on Thursday during first minister’s question time. Alex Salmond said he was bound by the legal red tape surrounding the public tendering process. But the argy-bargy quickly moved on to waiting times in the health service. This has been a running sore, so to speak, over the last few months. It was opened again this week by a report from Audit Scotland which found that the accounting system in the NHS was not sufficiently accurate to track whether health boards were massaging their waiting time figures or not.

No patient is supposed to wait more than 18 weeks between their GP’s referral and the start of their treatment. But apparently there was an increasing number of patients being classed as “socially unavailable” for treatment – perhaps on holiday or away on business – and thus not counted against the 18 week target. The increase came to a suspicious end when NHS Lothian was found to be offering patients treatment at hospitals in England and then removing those patients from their lists when they refused to travel south.

The whole argument comes down to one of resources. The SNP government says it has protected the health budget from Westminster’s austerity measures, but it has not increased in line with demand or even rising costs. And there is no sign that the winter of cutbacks and hardship will turn to spring any time soon.

Scotland’s leading children’s charities joined forces this week to publish a study showing that 20 per cent of children in parts of almost every council area in Scotland are living below the poverty line and they predict that government spending cuts are about to make matters much worse. In Glasgow North East for instance, 43 per cent of children are living in poor households. (“Poor” being defined as 60 per cent of average income.)

The unemployment figure this week may have fallen slightly to 7.7 per cent but people seem to be no better off and consumer spending is down. The Scottish Retail Consortium says 10 per cent of shops are now empty and boarded up. The explanations put forward are that more people are in part-time work, more are self-employed on lower earnings, productivity is down, and more and more people are giving up the search for work altogether.

In all this winter gloom, we needed something to cheer us up and it came in the pleasing form of Emeli Sande. The singer and song writer from Alford in Aberdeenshire stomped all over the stage at the Brits, winning two awards – best British solo female artist and best British album of the year. Emeli went to the same school in Alford where her Zambian father was a teacher and wrote her first song at the age of 11 for the end of term show. She left her medical course at Glasgow University when her music career suddenly took off in 2008. The rest is legend.

And so was my Monday night. I was enticed into the vaults under the Royal Mile in Edinburgh by a woman dressed as a witch. Be assured that this was an official tour and I was with a group of 30 witnesses. We were “treated” to some gory tales of torture, hangings and ghosts from long ago and, at one point, the witch lunged at me with a knife.

I thought I was a goner, like Sir John “Red ” Comyn who fell to Robert the Bruce’s knife in 1306. Sir John was a rival for the Scottish throne and old Uncle Bob, who’s victory at Bannockburn we shall be celebrating next year, decided he’d better make sure of his place in history while he could. Somewhat embarrassingly, we have been reminded of this piece of political manoeuvring by the discovery of Sir John’s pendant in a muddy field in Kinross earlier this month.

A metal detector enthusiast from North Berwick John Eldridge at first thought it was a school prefect’s badge from the 1960s or 70s because it was so perfectly preserved. Sir John’s three sheaves are clearly seen on the pendant which is assumed to have fallen from the reigns of his horse while he was on his way to Loch Leven castle. Oh how the past comes back to haunt us.

Braehead shopping centre from the air <em>Picture: Jim Smillie</em>

Braehead shopping centre from the air Picture: Jim Smillie

The current economic climate is having a serious impact on Scottish jobs and future business prospects. Newly published data from the Bank of Scotland, the Scottish Retail Consortium and the Scottish Building Federation confirm that consumer and economic confidence has been affected, despite the fact that Scotland’s labour market improved slightly last month.

The Bank of Scotland’s monthly report on jobs shows a small rise in the number of permanent and temporary staff being taken on. However, the starting salary for new recruits to full-time jobs has fallen for the first time in more than a year. The bank says that the figures point to rates of growth “below the respective long-run series averages”.

According to the bank’s chief economist, Donald MacRae, “Despite slowing growth in the eurozone and the UK, the number of people placed into permanent jobs increased after December’s decline while the number of vacancies for permanent staff was broadly unchanged from the end of last year. This latest barometer suggests the Scottish economy is struggling to maintain growth momentum in challenging economic conditions.”

Just how challenging these conditions are is shown by the latest figures on footfall at Scottish shops. The latest report from the British Retail Consortium suggests that Scotland was also one of the worst affected parts of the UK over the last three months. Compared with the same period last year, there was a fall of 8.5 per cent in the number of people out shopping here.

In the view of Ian Shearer of the Scottish Retail Consortium, “These results are further evidence of the troubled times for Scottish retail. Even Christmas failed to bring shoppers out in Scotland. The drop of 8.5 per cent in footfall for the quarter sadly mirrors the worrying monthly sales figures in our recent Scottish retail sales monitor reports, which have shown the worst declines for over a decade.”

The position is even worse in the Scottish construction sector, which has seen another sharp drop in confidence levels. A survey for the Scottish Building Federation (SBF) reports that its members expect to see public sector contracts fall further this year. Only 9 per cent expect to take on new staff this year, while 30 per cent expect to cut their workforce.

In total, 79 firms completed the survey. Only 10 per cent expected to see house-building pick up; 40 per cent say it will continue to decline from already low levels. Only those firms involved in repair and maintenance show any signs of confidence, believing they have the best prospects for winning contracts.

“The industry has already lost 30,000 jobs in the space of a year,” said Michael Levack of the SBF. “But with more firms anticipating they will have to make redundancies this year than those hoping to recruit, there’s a real prospect that industry employment levels could drop further yet before they start to recover.

“Over the coming months, I hope the industry can work constructively with government at all levels to start rebuilding confidence that has been shattered by the economic downturn. An excellent place to start would be to start dismantling the huge unnecessary bureaucracy around procurement and planning that has stifled our industry for far too long.”

In a statement, the Scottish government said that “we are using every lever currently available to us to secure new investment and create and safeguard jobs, in the face of severe cuts from Westminster. We need the UK government to follow suit and implement a ‘Plan MacB’ approach for the UK economy – increasing capital investment, securing consumer confidence, and ensuring that businesses have access to finance to create the conditions necessary for recovery.”

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Dr Neil Bentley, CBI deputy director general <em>Picture: CBI</em>

Dr Neil Bentley, CBI deputy director general Picture: CBI

Following the pessimistic reports on employment earlier this week, today’s unemployment figures didn’t come entirely as a surprise, although they appear to be worse than expected.

The number of Scots looking for work rose by 1,000 between April and June, the first time the total has gone up since last autumn. It means that some 209,000 are unemployed in Scotland. The number claiming Jobseeker’s Allowance last month also went up – by 2,600, to just under 144,700.

Across the UK as a whole, the number of people on unemployment benefit showed the biggest increase in more than two years, rising by 37,100 to 2.49 million. Again, the number claiming Jobseeker’s Allowance rose by 37,100 in July to 1.56m, the biggest increase since May 2009. It means the claimant count has risen for five months in a row and is now at its highest since February 2010.

Curiously, almost all of the UK’s net gain in employment in for the quarter was found in Scotland. The latest survey reports that there were 24,000 more Scots in jobs, out of 25,000 for the whole of the UK. Scotland therefore finds itself in the paradoxical position where employment and unemployment are rising simultaneously, with the situation in Scotland slightly better than elsewhere in the UK.

Alex Salmond, the first minister, pointed out that the recession had been both shorter and shallower in Scotland compared with the UK as a whole, adding that “the action taken by the Scottish government has had a positive impact. We accelerated capital investment at the height of the recession and over the year to March workforce construction jobs were up by 19,000, or 11.6 per cent, in Scotland – compared to a fall of 5,200, or 0.2 per cent, across the UK.

“Our no compulsory redundancy policy for staff under our responsibility is helping to boost consumer confidence, and our commitment to the social wage – including the council tax freeze, no tuition fees, free prescriptions and free concessionary travel – is giving Scots households maximum protection at a time when other bills and inflation are on a sharply rising curve.”

But the general secretary of the Scottish Trades Union Congress, Grahame Smith, said that the organisation “had argued that the weak labour market recovery in Scotland through 2011 could not be sustained and, unfortunately, today’s statistics prove us correct.

“The two major concerns are the sharp rise in people claiming Jobseeker’s Allowance in the month to July and the surge in ‘underemployment’. With minimal growth in the economy over the last nine months, steeply declining real incomes, collapsing consumer confidence, austerity spreading across key export markets and public spending cuts just beginning to bite, the prospects for the Scottish labour market are grim.”

In the view of Scottish secretary Michael Moore, “the first increase in unemployment since autumn last year is a reminder of the challenging economic circumstances we face. The UK government’s priority is to continue to support the economy by reducing the deficit and putting in place measures to encourage growth in the private sector. We are creating a new model of economic growth, driven by investment and exports, and more evenly balanced across the UK and sectors.”

The chancellor, George Osborne, described the figures as “disappointing”, but not surprising given what was going on in the world economy and with world markets. He said the government was continuing in its efforts to help create new jobs, including the announcement of 11 new “enterprise zones” in England which will, it is hoped, boost local economic growth and create more than 30,000 new jobs by 2015.

Nationally, the Confederation of British Industry described the rising unemployment as a “cause for concern”, but said that many new jobs were being created in private sector. Its deputy director general, Dr Neil Bentley, said that there was “some cause for optimism in that over half a million net new jobs were created by the private sector in the last year, and total numbers employed also rose in today’s figures.

“Addressing the persistently high level of youth unemployment has to be a priority,” he added, “with numbers of 18 to 24-year-olds out of work continuing to rise. Businesses are committed to getting young people into work, with many already offering apprenticeships, training opportunities and work placements. But the government must do more to prioritise private sector growth, which is the best way to create jobs.”

Today also saw the release of the latest figures on retail sales in Scotland, showing slightly better results than expected. Sales in July were 0.2 per cent higher than a year ago, when they had fallen 1.4 per cent. Food sales picked up after a tough time in June with clothing and footwear, while lower than 2010, showing an improvement mainly as a result of clearance sales.

Richard Dodd, head of media at the Scottish Retail Consortium, said that the general return to sales growth was “positive news for Scottish retailers but it shouldn’t detract from the underlying weakness in consumer spending. Shoppers continue to feel the impact of high levels of inflation and low wage growth as households’ real incomes shrink. The VAT increase and the effects of cuts have also dented consumer confidence.”

The figures were gathered by KPMG, whose head of retail in Scotland, David McCorquodale, pointed out that “July’s modest increase compared with the same month last year will come as some relief for Scottish retailers. But, given the level of inflation and the increase in the VAT rate, customers are actually buying fewer goods than a year ago.

“Despite more people choosing to holiday at home rather than spending time, and money, abroad, the three-month average remains weak. Pay freezes for Scotland’s workforce, coupled with inflation in energy bills, are clearly having a detrimental effect on consumer confidence as economic uncertainty reigns. This is evidenced in the continued struggle in the big-ticket item market but the relative strength in the value sector. Few retailers are particularly optimistic about the outlook, although many expect inflationary pressures to decrease in the latter part of the year.”

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labour3Scottish Labour demanded that the SNP comes clean on the Local Income Tax cover-up as a media report revealed that the bill to the tax-payer is now running at over £85,000.

The SNP government is taking the case to the Court of Session, at the expense of the taxpayer, to halt the publication of figures from the Scottish Information Commissioner.

Scottish Labour’s candidate in Clackmannanshire and Dunblane Richard Simpson said:

“The SNP clearly have something to hide and people are outraged that the hard-pressed taxpayer is now picking up at least an £85,000 bill for this continuing deception. The SNP originally said that this action had only cost £5,000 but this has also been exposed as false.

“A local income tax will hit hard working families in Scotland in the pocket and that is why Labour will fight the SNP’s damaging proposals. But the SNP need to come clean with the public and release this information instead of trying to cover it up ahead of the election.

“Voters are rightly angry at this continuing cover-up.”

Scottish Labour’s finance spokesman Andy Kerr said that the CPPR report published yesterday showed that there was a £458m blackhole in the SNP’s spending plans.

Andy Kerr said:

“These figures published today clearly show that there is a £458m blackhole in the SNP’s spending plans. Put quite simply their numbers just don’t add up. They are proposing to spend money they simply haven’t got. This can only mean more broken promises if they are re-elected.

“Only Labour shows a surplus over the next four years without having to rely on achieving generic efficiency savings or using borrowing powers and we are the only party that has ensured we have a balanced budget.

“Now the Tories are back we need a government in Scotland that will concentrate on what really matters and not make pie in the sky promises they can’t keep.

“The SNP have not even allocated any money to pay for the retention of police numbers which is a shocking admission and shows that again they are setting up another broken pledge.”

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Scottish Labour leader Iain Gray said that yesterday’s GDP figures represented more grim news for the Scottish economy coming only a day after figures from the Scottish Retail Consortium that showed that retail sales had fallen for the first time in a decade.

Mr Gray said:

“These figures make very grim reading today and show that after all of Alex Salmond’s bragging the Scottish economy is suffering.

“The falls in Construction GDP of 2 per cent is bad news for an industry that has been let down by the SNP as they turned off the pipeline of schools and hospitals because of political dogma. These figures also come only a day after retail sales dropped for the first time since devolution under the SNP’s watch.

“With business insolvencies also up by a third this shows that Scotland needs a government that will concentrate on what really matters. Labour’s focus is on growing the economy, creating jobs and prosperity not obsessing about separation.

“The Tories decision to hammer hard working families with a huge VAT hike is also having an effect is contributing to the damage to the Scottish economy.”

CBI logoToday, the Scottish Government is expected to publish its Local Government Finance Statement. Traditionally, it’s the time when the level of business rates for the coming year is confirmed. But the government’s already been criticised for its plans to increase rates for large stores and out-of-town shopping centres.

At the time of his draft budget, the Scottish Retail Consortium accused the finance secretary, John Swinney, of “jeopardising future development, growth and jobs in the retail sector”. Its director, Fiona Moriarty, called it “an outrageous, unexpected and unjustified move by the Scottish Government”.

She pointed out at retailers already paid a quarter of all business rates, the highest proportion of any business sector, adding that “supermarkets and other large retailers play a vital role in the Scottish economy, providing jobs, services, value and choice as well as investing in training and regeneration”.

This morning, a letter will land on Mr Swinney’s desk from CBI Scotland. It calls on the Scottish Government to support businesses and the economic recovery by making sure that the rates paid by companies north of the Border remain in line with those in the rest of the UK, so that Scottish firms maintain a level playing field with competitors down south.

The organisation also wants the plan to levy a £30m annual business rates surcharge on larger retailers and businesses located in out-of-town retail parks scrapped. It says that this would make Scotland a more expensive place for retail firms to invest and create jobs than elsewhere in the UK.

It wants any surplus from the proposed new “Business Rates Incentivisation Scheme” which starts next year to be ring-fenced. From April, councils will be allowed to keep a proportion of any growth in business rates income from their area. The CBI wants this to be spent on local economic development such as better roads or better resourced planning departments.

CBI Scotland’s Director, Iain McMillan, said: “These are leaner times for the devolved administration, however on business rates policy Ministers must ensure that firms operating in Scotland are not put at a cost disadvantage compared to competitors elsewhere in the UK.

“We strongly oppose the plans to levy a business rates surcharge specifically on retailers, which is deeply disappointing and comes at a time when government ought to be making it easier for retailers and retail chains to invest and create jobs in Scotland, not more expensive.”