Monthly economic brief: February 2021

Business Turnover

A renewed fall in business turnover in the final quarter of the year as restrictions are tightened emphasises the ongoing cash flow challenges for businesses.

Monthly Business Turnover Index^[7]

• The Monthly Business Turnover Index for December showed that most companies in Scotland continued to report that turnover had fallen compared to last year (44.0), however, the index strengthened from November (up from 40.3).
• Compared to last year, business turnover has increased in the Manufacturing sector (52.7) but continues to be notably lower in the Services sector (42.4). Within the Services sector, Accommodation and Food Services continued to be the industry with most businesses reporting a decrease in turnover over the year, followed by Culture and Recreation Services. However, while turnover continued to stabilise for Transport and Storage and Business Services, the Accommodation and Food Service sector and retail (food and non-food) weakened over the month reflecting the tighter restrictions during the month.

• More recent Scottish Government estimates of ONS BICS data in December/January suggest that some of the sector differences in business turnover have continued into the start of the year.
• Overall, 45% of businesses reported having lower turnover than normal for the time of year (down from 56% in October/November and from a high of 65% in June/July). The Accommodation and Food services sector has the highest proportion of firms (75%) reporting that business turnover is lower.^[8]

• Furthermore, business resilience remains a key factor as restrictions on activity continue at the start of the year. The same survey showed that in January, 28% of firms reported having no, or less than 3-months’ of cash reserves (34% had more than 6-months), while 15% reported a severe or moderate risk of insolvency (73% reported being at low or no risk).