Bill Jamieson: 'Expert' predictions have been rendered redundant by the ferocity of the global downturn

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WHO said, and I quote: "We forecast Scottish house price growth to be 4% in 2008… Strong fundamentals will underpin demand in Scotland… the Scottish economy is forecast to grow by 2% in 2008… rising above its long-term average in the first quarter and potentially strengthening further midyear."

And who said, and I quote: "Our outlook for Scotland is for continued employment growth which will be led by the business services and public services sectors… Gross Value Added growth within Scotland in 2008 is estimated to be above the UK average growth – 2.4% compared with 2.1% respectively…"

And who said, and I quote: "The outlook for the Scottish economy is broadly positive with higher Gross Value Added growth forecast to 2010 than observed between 1999 and 2006… The service sector will continue to drive the growth of the economy and growth in the financial and business services sector will continue to underpin this…. Construction sector GVA will expand by a further 10% and Scotland's engineering sector… will see GVA growth of 8% by 2010."

Stand up, economists all. Or should that be hide in a cupboard till the storm passes? The first quote is taken from the Bank of Scotland's Economic Forecast for 2008 published a year ago this week. The second is from Oxford Economics. And the third, dated April 2008, is from Experian. The detailed forecasts from the latter two are available on the website of Scottish Enterprise and are the latest available assessments there of the outlook for the economy in Scotland.

It is easy to poke fun at economic forecasts. But this year "easy" is not the word that applies and there is very little fun at all. Almost all were wildly wrong. Seldom has such an epochal storm in global markets unfolded with such intensity and speed. Barely anyone predicted the storm and its ferocity.

To say that this was an "outlier" event would be an understatement. The detailed assessments are accurate and well presented analyses. But they have been rendered redundant by events, as I expect many similar "scenario plans" have been turned into historical curiosities by a financial meltdown that has brought Scotland's two biggest banks to their knees, smashed through the housing market and the retail sector and is now wreaking havoc across almost all sectors of the economy.

Where stand our prospects now? An invaluable monthly summary is published by Mackay Consultants and the December edition makes grim reading. November, it states, "was a very bad month for the Scottish economy, with a lot of negative developments", and by the time you have read through the list, you may feel the author errs on the side of understatement.

Royal Bank of Scotland announced 3,000 redundancies worldwide. Virgin Media revealed plans to cut 2,200 UK staff and all 1,450 call centre staff employed by the group at bases in Glasgow, Edinburgh, Bellshill and Glenrothes could be affected. Glasgow-based Thus is shedding 700 jobs. Greenock-based British Polythene is closing a factory, and 350 jobs are threatened with the proposed closure of a fish-processing firm in Inverness.

Five Scottish companies were put into administration last month including Edinburgh-based MicroEmissive Displays, Heritor's Residential Property and Nardini's at Regattas restaurant in Largs.

Nor has the public sector been unscathed. Aberdeen and Glasgow city councils are shedding staff and HM Revenue & Customs said 20 offices with 400 staff will close across Scotland.

This recession is widening and deepening by the week. The opening months of the new year are likely to see a swathe of failures in the retail and business services sectors. In a provisional forecast for 2009, Mackay Consultants expects to see a significant GDP decline of 1.5% and very little growth the following year.

Most forecasters have reduced their forecasts for 2009. For example, the central forecast of the Fraser of Allander Institute is for a decline in Gross Value Added next year of 1.1%. The consensus or average forecast for the UK economy next year is for a contraction of 1.4%. That figure is likely to become more pessimistic in the coming weeks.

There is now no disguising the fact that Britain – and Scotland – has entered a severe recession. Forthcoming surveys and company results are likely to continue to reflect the rapid plunge in economic activity and resultant surge in unemployment. The two words I hear most frequently on the lips of business contacts are "ferocity" and "speed".

The best we can hope for at this stage is that we are in the eye of the storm and that by March the steepness of the plunge will have moderated, even if the direction remains the same. Until then, all economic forecasting bets are off. However, if there is some sign of a break in the clouds by the spring – not a recovery but an easing of the intensity of decline – we will need a new appraisal of the longer-term prospects for the Scottish economy, addressing a question that will be asked with increasing apprehension: what sector or activity is most likely to lift the economy out of this slump?

Scotland's economic history over the past 40 years can be divided into three waves: first, in the 1970s and early 1980s there was the huge excitement and activity of North Sea oil which turned Aberdeen into a boom city and did much to raise business confidence across the land. Second was the wave of inward investment that brought Silicon Glen and a large number of overseas electronics companies to Scotland. Then, over the past eight years, came a phenomenal boom in financial services. Royal Bank of Scotland grew rapidly, Bank of Scotland was taken over by Halifax to create HBOS, and Scotland proved a magnet for financial services companies while many finance-related call centre operations moved here.

Each of these waves played a big part in making good the decline in manufacturing and lifting our economic growth rate. So what will be the principal driver now that financial services has suffered a severe setback?

The next "big thing" could well be infrastructure projects. The Scottish Government's National Planning Framework identifies 12 of these, ranging from drainage works to road and rail additions and improvements – and, of course, a new Forth road crossing. However, it is going to take many months before we have a clearer idea which ones will be given priority and many months after that before planning procedures are completed and work can begin. Indeed, these big public works projects might not start to create jobs and activity until some time after recovery has started elsewhere in the economy.

On past form, housing and construction – the worst-affected sector this time around – tends to be first out. Assuming further cuts in interest rates it would not be too fanciful to see housing inquiries picking up in the late spring or early summer of next year, though prices will still be falling. Tourism may have a better than feared summer and autumn due to the fall in sterling against major currencies. But for longer-term innovation and growth, we need to see some real developments of scale in those other Scottish Enterprise priority sectors of life sciences, energy, food and drink, as well as digital markets and knowledge-driven new companies. A conference in the late spring may well help to clarify prospects. In the meantime, if you have an urge to make an economic forecast, take a tip: best to lie down until the mood passes.