MORE THAN half of Scottish organisations plan to lay off staff while a similar percentage will stop hiring, according to the latest quarterly economic survey by KPMG.

The accounting giant also added its voice to the growing belief that the credit crunch has now spread to the rest of the economy, predicting it will squeeze credit and hamper the economy for the next one or two years.

According to Craig Anderson, head of KPMG in Scotland, businesses are now "feeling the impact of a perfect storm' of rising inflation, tightening credit conditions and plummeting consumer confidence".

The research confirmed it has been impossible to quarantine the credit crunch as the government had hoped, and that the wider economy is hurting more and more deeply.

As Anderson said, the results of the KPMG survey showed "that the credit crunch may finally have hit home across the UK regions including Scotland", and that "we're all in this together, possibly for the long haul".

A separate survey by restructuring specialist Begbies Traynor showed conditions are worsening in information technology, construction, manufacturing, retail and transport, among other areas.

"In times of economic slowdown, you would expect the construction and retail sectors to suffer," said Begbies Traynor executive chairman Ric Traynor, who believed the squeeze could run for as long as three years. "However, the statistics also show that many other industry sectors are being affected by the current conditions."

The two surveys differed on the immediate cause of the slowdown. According to Begbies, the sharp increase in companies with "critical problems" was largely a result of credit lines drying up, while KPMG cited a broader list of problems including rising inflation and higher interest rates, as well as tighter credit.

Both pointed to accelerating problems, however. Begbies's data showed a sharp jump in the number of troubled companies in nearly every sector since the first quarter of this year, while KPMG's survey revealed that senior executives in public and private organisations have become much more pessimistic since March.

The main sectors to have maintained business confidence are automotive, manufacturing and professional services, but all are expected to share in the suffering to some degree in the months ahead.

Although the credit crunch is hurting different sectors in different ways, experts agreed that the dearth of capital ultimately lies behind the pain.

According to David Roche, president of London-based Independent Strategy, the collapse in the issue of global credit has reached between 30% and 80% in some categories, inevitably stifling economic growth. The effects have already hit the United States and, in a global credit market, are now spreading to Europe and Britain. Roche estimated the global banking industry's total destruction of capital from the credit crunch will eventually hit between $1 trillion (£0.5trn) and $1.4trn, between two-and-a-half and three times the estimates of six months ago.