UK Economy Grows Three Times Faster Than In Scotland

4 October 2017, 14:39

British money

The UK economy has grown three times faster than it has in Scotland over the last year, new figures suggest.

The latest GDP figures for the period April to June showed a rise of 0.1% north of the border, over the quarter, compared to a 0.3% increase recorded across the UK.

While Scotland's service sector, which makes up the bulk of the economy, grew by 0.7% in the second quarter of 2017, production fell by 0.7% while construction slumped by 3.5% - meaning this sector has now been in decline for 18 consecutive months.

Scottish GDP was 0.5% higher than it was in April to June 2016 - but over the same period the UK economy grew by 1.5%.

Economy Secretary Keith Brown stated: "Today's figures are good news, showing the Scottish economy continuing to grow over the second quarter of this year."

But economics expert Professor Graeme Roy, director of the Fraser of Allander Institute at Strathclyde University said: "In five of the last six quarters, Scottish growth has been just 0.1% or lower."

Initial figures for the first three months of this year suggested GDP in Scotland had grown by 0.8% - with this staving off fears the country could go back into recession.

But that data has now been revised, with the increase in GDP scaled down to 0.6%.

Prof. Roy said: "It is important to look at the longer-term trend given the inherent volatility in the Scottish GDP series.

"Over the year, the Scottish economy has grown around 1/3 of the equivalent UK rate."

He said the GDP figures for April to June "continue to show just how fragile growth the Scottish economy is at the current time".

The expert added: "On the one hand, continued growth is clearly welcome and on the back of the strong growth in quarter one 2017, we always said that holding on to some of these gains would be a success in its own right."

The "one significant bright spot" in the data was the strength of Scotland's services sector which grew 0.7% over the quarter, Professor Roy added.

But he said: "Construction continued to decline - for the sixth consecutive quarter - whilst manufacturing also slipped back a little."

Mr Brown conceded the GDP figures showed "more modest growth than we would ideally like to see".

However he added: "It is particularly pleasing to see growth over the first half of the year in industries linked to the oil and gas supply chain, which provides more evidence that confidence is gradually returning to the sector.

"Additionally we are seeing strength in Scotland's services sector - which is particularly good news given that it is by far the largest part of the economy in terms of turnover, value added and employment.

"This, in addition to our record low unemployment and record high employment rates, is evidence that the fundamentals of our economy remain strong."

The construction sector "continues to adjust as a number of major infrastructure projects have reached completion", Mr Brown added, but said it was still "significantly higher" than it had been in 2014.

He claimed the decision to leave the European Union was the "single biggest threat" to the economy, calling on Westminster to "people and businesses greater certainty over the Brexit process in order to further stimulate growth in Scotland's business communities and allow us to continue to attract and retain talent within our workforce."

Scottish Secretary David Mundell said: "The GDP figures show the Scottish economy growing, but at a far slower rate than we would like to see."

The UK Government minister said: "Scotland's economy still lags behind that of the rest of the UK, and it is more important than ever that Scotland's two governments work together to improve Scotland's economy.

"The UK Government is investing in Scotland, through support to our oil and gas industry, UK City Deals and our ambitious industrial strategy. Now the Scottish Government needs to use the considerable levers they have to increase Scotland's prosperity."

Labour economy spokeswoman Jackie Baillie accused the Scottish Government of "complacency".

She said: "Today's economic growth figures are anything but good news.

"They show almost no growth in the Scottish economy, and particularly disappointing figures for the construction industry - which has seen a 3.5% fall.

"Year-on-year we lag behind the rest of the UK's growth, which itself is nothing to crow about, with Scottish economic growth a third of the UK as a whole.

"The complacency of the nationalists, who have hailed these figures as good news, is breathtaking at a time when the Scottish economy remains on the cliff edge of recession."

Scottish Conservative economy spokesman Dean Lockhart said: "These figures show Scotland's growth has been repeatedly slower than that of the UK in general.

"Alarm bells should be ringing for the Scottish Government, particularly as new powers mean our public services are becoming more dependent on the performance of the economy.

"Three months ago when a blip saw Scotland edge in front of the rest of the UK, the SNP furiously patted itself on the back.

"Now the wider trend is apparent, the nationalists should explain to the businesses and hard workers of Scotland why they are so badly letting them down."

Scottish Liberal Democrat leader Willie Rennie said there was "no room for the Scottish Government to start celebrating" over the economy.

He added: "The SNP are presiding over an erratic economy. The brush with recession has been replaced by marginal growth."

Meanwhile retailers stressed that ministers, who are currently considering income tax rates in Scotland should rise, must be sure to "avoid any steps which will hit household incomes".

Ewan MacDonald-Russell, head of policy at the Scottish Retail Consortium (SRC) said: "Retailers will be encouraged to see the broader Scottish economy continue to grow for a second successive quarter. However, it's clear this growth is fragile.

"With significant inflationary pressures hitting both businesses and consumers, there can be no complacency about the challenges which Scotland faces.

"With customer confidence brittle, ministers should avoid any steps which will hit household incomes, and consequently impact on consumer spending.

"That spending is still the lifeblood of Scotland's economy and ensuring it continues to pump around the economy is a priority."