Page last updated at 23:23 GMT, Tuesday, 15 September 2009 00:23 UK

Businesses 'head for turnaround'

Manufacturing worker
The survey found manufacturing firms are still contracting

Scottish businesses are showing signs of being out of recession by the end of the year, according to the latest survey data from Lloyds TSB.

The private sector is still shrinking, but at a slowing pace, the bank's quarterly business monitor has found.

Business bosses' expectations of activity over the next six months could move the economy back into growth.

The availability of skilled staff is said to be returning as a concern for managers, particularly in services.

Out of 404 companies replying to the survey during June, July and August, 45% expect turnover to remain static over six months to next February, while 28% expect a decrease and 27% expect an increase.

That makes this the fifth consecutive quarter when there has been negative sentiment, but the direction of change, back towards improving revenue, has the bank's economists forecasting growth by the end of the year.

Business activity

The data, compiled by the Fraser of Allander Institute at Strathclyde University, showed a significant gap in expectations between service sector and production sector businesses, including manufacturing.

It registered a large majority of production firms still contracting, and showing more sluggish signs of returning to growth.

For the first time in 15 months, more service sector firms expect turnover to increase in the next six months than decrease.

The effects of the recession are fading, but the Scottish economy has yet to fully emerge from decline into growth
Professor Donald MacRae

But the most recent snapshot of business activity shows 44% of production companies registering falling turnover, and only 20% seeing an increase.

The figures point to an improvement in exports and total volume of business.

Concerns about the availability of credit have eased since the early part of this year.

Skilled staff availability, which was a major concern during the boom years, is returning as a concern for business managers, particularly in the service sector.

Professor Donald MacRae, chief economist at Lloyds TSB Scotland, said: "This latest business monitor shows the service sector about to emerge from recession with production businesses some way behind.

"Most forward-looking indicators are showing an increase in expectations for the remainder of the year suggesting a return to economic growth for the Scottish economy by the end of 2009."

He added: "The effects of the recession are fading, but the Scottish economy has yet to fully emerge from decline into growth."

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