Squeezed from every angle
It takes a very narrow view of the world to take any pleasure from the finding that Scottish businesses are shedding jobs at a slower rate than any other part of the UK.
More important to note is that they are being shed everywhere, though slightly slower than the first few weeks of the year.
The best explanation of that part of February's Royal Bank of Scotland's Purchasing Managers Index, out this morning, is that past recessions have shaken out the less efficient businesses in Scotland already.
In this recession, parts of English industry, notably in the car-making sector, seem to be catching up, though less because of inefficiency than due to a huge fall in demand.
The West Midlands is by far the worst part of the UK for private sector job shedding, followed by Yorkshire and Northern Ireland.
The other peculiarity about Scotland's position in the RBS PMI rankings is that it is the only part where managers have registered an upturn in input prices.
That comes from the decline of sterling pushing import prices up.
But such is the nature of the recession that businesses are not passing on those increased input costs.
Output prices are still declining, and of course, that means squeezed margins.
The overall picture is grim in every sector and on every count, though it's important to stress this is a snapshot view from across the economy while some companies have very different stories to tell.
The big picture is jobs, output and the level of backlogged work all registering rapid falls last month.
As backlogged work is completed, new orders and new customers are not feeding through, and bosses are also shedding staff to control their costs.
It has been noted before now that the expected crunch in finance sector employment has not hit home yet, and that continues to be the case.
Within the service sector, it continues to be the least bad performer.
It is the travel, tourism and retail sector that is taking the biggest hit in falling orders and staff levels, and that's despite the help you might expect from weakened sterling, which ought to attract more foreigners to these shores and keep more Brits at home for their holidays.
Anecdotally, it is business travel that is feeling the most pain, as it's an easy budget heading for corporate bean-counters to cut back.
Budget tourism is holding up reasonably well in some places, with some guest houses reporting unusually healthy bookings.
Hullo, I'm Douglas Fraser, and I'm business and economy editor at ´óÏó´«Ã½ Scotland. Welcome to my blog, where you can read my take on money matters, viewed from a Scottish perspective.
Comment number 1.
At 9th Mar 2009, Clamjamfrie wrote:Interesting piece Douglas, but let me suggest a few further points. While previous recessions may have shaken out the inefficient, aiding the strength of the economy in the longer run, the nature of this recession/depression is damaging businesses that in previous recessions would have coped well.
For example, because of the difficulties, but still being entirely solvent, my own small limited company is ceasing trading in a few weeks time. When we have a few thousands in reserve, we can get no more than 0.1% interest, while still hit by significant bank charges (including being charged for putting money in). When we need a small overdraft to even out the pattern of cash flow, the interest rate now payable is ridiculous (and despite the fact we have traded profitably every year for the last 26 years).
Furthermore, our accountant tells us that we have to start reporting in much greater detail the nature of our contracts, increasing the cost to the business, and increasing our accountancy costs. We are told it reflects increased effort by the UK government to squeeze every penny out of the small business sector it can.
I am fortunately in a position where winding up my business early is feasible (I have another business to focus on). But it is another Scottish business off the nations books, entirely unnecessarily and not as a result of inefficiency.
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Comment number 2.
At 9th Mar 2009, freedjmac wrote:Douglas,
It strikes me that there may be another reason why the Scottish jobless numbers may be, to first order, 'better' than elsewhere in the UK. (And having been made redundant myself 4 times in the last 20 years, I have no desire to see anyone made redundant!).
Ir does strike me that, at the current level of business, both HBOS and RBS must be grossly overstaffed and seemingly hesitant to shed staff despite a couple of recent announcements.
If the levels of lending being done by the banks is, as miserly as anecdotes tell us, then there must be gross over-manning in branches throughout the country.
Add to this the reported horrendous loan rates (as reported on 'Morning Extra' two weeks ago) being charged and it seems some banks just have no appetite for lending.
With legal firms now shedding staff even at the partner level, this confirms that the level of corporate finance activity must be close to historic lows, so just how do the banks justify retaining such high numbers of staff.
Your own radio report a week or two ago, suggested that perhaps RBS could shed 20% of its global staff. I think this estimate is grossly underestimated if activity levels remain the same. A large number of bank employees in the UK may be retained in their jobs in the perhaps unrealistic expectation that the upturn will come quicker.
It's hard to get away from the view that both HBOS and RBS must be carrying significant staff numbers that other industries would have shed by now!
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Comment number 3.
At 9th Mar 2009, kaybraes wrote:In the shakeout of jobs, what we have not yet seen is a shakeout of public sector jobs ; indeed most of the jobs advertised in local and national newspapers still appear to be in the public sector, and most of these appear to be "non jobs " which the country could very well cope without. I imagine that after the next election, when the public sector votes are no longer of any use to the Labour party , there will be a massive cleanout of public sector jobs at both local and national level. (the tories will be blamed of course ) The government seems to be committed in the meantime to growing the public sector at an ever increasing rate .Whether this is policy or a sign of increasing incompetence, who knows, but it obviously cannot continue.
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