The economic recovery in Scotland faltered during the bad weather last December, according to Lloyds TSB’s Scotland Business Monitor.

45% of Scottish firms saw their turnover decline in the quarter ending February this year, while 30% reported no change. Only 25% of companies saw turnover increase which means the result was the most negative for over a year. Consumer confidence in Scotland is still positive but at a low level and spending is constrained.

There’s good news for IT contractors north of the border. The Bank of Scotland’s Report on Jobs shows that demand for IT contractors witnessed the fastest increase in demand in the first month of this year making the IT and computing sector in second place on the demand list behind medical and nursing.

The chief economist at the Bank of Scotland, Donald MacRae, said the economy in Scotland is recovering from the winter bad weather. The Barometer has now improved for five consecutive months posting a reading of 55.2 last month, its highest level for over three years.

All eight Scottish sectors saw an increase in demand for contractors and permanent employees, and there was a noticeable increase in the number of vacancies in engineering and construction.

Opportunities in the Scottish gaming industry are also set to increase next year after Outplay Entertainment announced it will create 150 new jobs in Dundee. These will include roles for technical developers, producers and artists.

The founders of the firm will work with local recruiters and hope to source talent from the University of Albertay, a learning institution with a proven record for producing talent for the gaming industry.

Douglas Hare, Outplay Entertainment’s chief executive said Scotland has a reputation as a creative, inspired and innovative nation, with the right people, skills and support all in the right place.

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The chief economist at the Bank of Scotland has predicted that the Scottish economic recovery is going to slow down in Q3.

The Scottish economy has been on a bumpy road since emerging from the recession at the end of last year. Although the private sector has been growing for the past 13 months, economic growth actually stalled in the first quarter of this year.

Scottish manufacturers’ sentiment dropped 20 points to zero between quarters one and two according to the CBI index and the Consumer Confidence Index, compiled by Gfk NOP, registered -22 last month.

Those looking for new employment will be heartened by the news that the Bank of Scotland’s Report on Jobs showed an increased demand for permanent workers for the 8th consecutive month.

Growth in the leisure, tourism and travel sectors continues to outstrip growth in business and financial services. And the manufacturing industry is receiving more orders and they are rising faster than inventories, so manufacturers will need to increase the supply of finished goods if they are to keep up with demand.

However, it is thought that the recovery will slow down in the autumn months as widespread concerns continue over government spending cuts.

However, good news for the Scottish jobs market comes with the news that Hewlett Packard is to create 700 new IT jobs at its plant in Erskine, something which could benefit umbrella company IT contractors. The technology giant is setting up a service hub in Renfrewshire, partially aided by a government grant of £7 million.

Alex Salmond, the First Minister, is delighted at the news saying it is testament to the skilled workforce in Scotland that HP has decided to invest in the region and it also points to conditions improving in the IT sector.

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The Scottish economy continued to improve in July, but this improvement did nothing to boost employment levels.

After five consecutive months of job creation, businesses north of the border reported that recruitment levels remained the same last month, compared with a slight increase across the UK as a whole.

Private sector companies continued to see an increase in new business albeit at a slower pace than in the previous 5 months.

The chief economist at the Bank of Scotland, Donald MacRae, said that this was the thirteenth consecutive increase in business activity. Manufacturing still led the recovery whilst growth in the service sector was moderate. There was an increase in new orders for the sixth consecutive month; however last month’s rise was weaker than in previous months.

The business and financial service sectors have shown welcome growth and tourism and travel continue to grow but at a slightly lower rate. MacRae concludes that the overall economic recovery news is positive, albeit slightly subdued.

However, there are fresh fears that Scotland may be about to suffer a surge in corporate failures. Figures from the Accountant in Bankruptcy showed that liquidations in Scotland rose by 103% in the 2nd quarter.

This was a rise of 8% over Q1. 572 companies in Scotland have gone into liquidation in the first six months, up by 265 on the first half of 2009.

Bryan Jackson from PKF business advisers and accountants warns that public sector spending cuts could lead to more corporate failures.

The largest rate of failures in Q2 were in the property and business activities sector, followed by the construction industry.

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The Scottish private sector recovery slowed down last month according to June’s purchasing managers index from the Bank of Scotland. This development could affect umbrella company contractors operating in Scotland.

The index measures activity across the manufacturing and service sectors in Scotland and last month it fell to 52.9 from the May figure of 53. Employment growth and new orders also decelerated during the period.

The chief economist at the bank, Donald MacRae, remarked that although the recovery slowed last month, manufacturing output achieved its best ever rise offsetting the sluggish growth in the service sector.

Clients appear to be postponing new projects due to fears that the recovery will not be sustained and this view was most apparent in the services sector.

Recruitment continued to increase in Scotland last month for the fifth consecutive month, although at a lesser rate than in the previous months.

In some circles there are now worries that Scotland could suffer a ‘double-dip’ recession. Scotland depends more on public sector employment than the rest of the UK and with government spending cuts looming more jobs could be lost.

There are also concerns that growth in the private sector may not be quick enough to soak up the inevitable redundancies in the public sector.

Elsewhere in the UK the picture looks slightly better although the PMI dipped one point in June. The index published by Markit/CIPS dropped to 54.4m the lowest level since last August. This was also the third drop in the index in the last 4 months.

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