Monthly economic brief: June 2020

Business Activity

Business surveys are providing timely insights into the current impacts on business activity in Scotland amid the coronavirus pandemic, physical distancing guidelines and lockdown measures. They provide early insights into the extent and scale to which business activity is continuing, the impact on business turnover and cashflow, and provide essential context for the wider range of indicators on economic output and the labour market.

Proportion of business still trading^[3]

• The pandemic and introduction of physical distancing and lockdown measures has resulted in many businesses requiring to temporarily close – either directly or indirectly through a collapse in demand.
• Between 4 May and 17 May, 19% of businesses reported that they had temporarily closed (UK: 18%) and 81% reported they were continuing to trade (UK: 82%).

Workforce measures

• Many business that have continued to trade have had to change the scale and approach of their business operations, particularly around their workforce.
• 36% of responding UK companies that were continuing to trade had been laying off staff in the short term – most prominently in the Construction sector - while 31% had decreased working hours.
• Responding UK companies that were continuing to trade, reported that 20% of their workforce were on furlough leave. This was most prominent in sectors such as Arts, Entertainment & Recreation (63%) and Accommodation & Food (62%).

Business activity

• The RBS Purchasing Managers Index^[4] for April reported that business activity across Scotland's private sector fell to its lowest level (10.7) since the survey began in January 1998.
• At a sector level, the services sector recorded a faster decline (10.3) than the manufacturing sector (12.4), although both sectors saw the most marked falls in activity on record.
• Businesses linked the fall in activity to the fall in demand resulting from the pandemic.
• Latest UK PMI survey data for May reported a further sharp fall in UK output over the month (30), though had picked up from April's record low (13.8).

Trade

• On the back of significant global trade headwinds in 2019, many businesses have faced supply chain disruption and a fall in demand for exports in 2020 as the coronavirus pandemic has spread internationally and lockdown measures across countries have impacted on demand and output.

• Between 4 May and 17 May, 77% of Scottish exporters (whose financial performance was outside normal expectations) reported that they are exporting less than normal compared to 62% of importers (UK: 74% of exporters and 60% of importers).

• 16% of Scottish exporters (UK: 17%) during the pandemic reported that their exports had not been affected, compared to 29% of importers (UK: 28%).³
• HMRC data for trade in goods in the UK, showed that in March 2020 the total value of exports of goods (EU and non-EU ) have fallen by 15% to £28.8 billion compared to March 2019.
• HMRC also published data on Scottish ports activity for non-EU trade only^[5]. Scottish port data shows a slight drop in activity in Scottish ports compared to March 2019, and provides an early indication of the impact of COVID-19 on Scottish trade in goods.
• Compared to March 2019, non-EU exports leaving Scottish ports fell by 28% and non-EU imports entering Scottish ports fell by 24%.