DCSIMG

Comment: Scotland says its prayers for economic boost

George Kerevan

George Kerevan

  • by GEORGE KEREVAN
 

WHAT’S in store for the Scottish economy in 2013? All the local forecasters agree growth will be up next year, admittedly from a low base in 2012 when the UK as a whole struggled to escape double-dip recession.

However, there is a wide divergence as to how much the Scottish economy will recover.

The most optimistic is Tony Mackay who is predicting growth of 1.5 per cent. That would put Scotland’s performance ahead of the UK as a whole, while the Office for Budget Responsibility is forecasting 1.2 per cent growth and the IMF 1.1 per cent.

Ernst & Young’s Item Club provides the most pessimistic prediction, with only 0.7 per cent growth in Scotland. Don’t be fooled by the small numbers involved: that’s fully half the Mackay prognosis. Which only goes to prove that forecasting GDP is more prayer than science. The doughty Fraser of Allander Institute at Strathclyde University offers 1.3 per cent growth for 2013.

Scotland’s economy is more dependent on the public sector than is the UK as a whole, so continuing austerity at Westminster will weigh heavily north of the Border. The main strategy of the Scottish Government has been to switch spending from revenue to capital investment, to stimulate construction. Unfortunately, this constitutes a marginal shift within a Holyrood spending envelope that is contracting overall.

Yet there do seem to be some green shoots in the private sector. The latest Bank of Scotland employment survey indicates healthy increases in both permanent and temporary staff as 2012 ends. Companies hiring include Plexus at Bathgate, ROVOP in Aberdeen, Vector Aerospace in Perth, and Walkers Shortbread in Aberlour.

Warning: much of this positive impact seems concentrated in the north and the east, rather than in the west, which is reflected in Mackay’s optimistic growth forecast for Scotland – Mackay is based in Inverness.

The wild card in 2013 is consumer confidence. Consumer spending is the main driver of growth. But a year-end report from the Halifax indicates Scottish towns experienced the steepest falls in UK house prices in 2012, which is bound to depress retail spending. Again, the worst house price falls were in the west of Scotland.

Memo to Holyrood: stronger growth in 2013 requires boosting the housing market.

Cook needs new gizmos as rivals bite Apple

One person Santa missed out this Christmas was Apple chief executive Tom Cook, whose 2012 pay packet is a miserly $4 million (£2.5m). Yet in 2011, on top of basic pay, Cook received $376m (£233m) in stock options, when he replaced the late Steve Jobs as head of the high-tech style icon that gave us the iPad and iPhone. Jobs was Apple’s techno wizard while Cook, his long-time lieutenant, took care of the complex global production chain. Cook got his giant bonus in 2011 because Apple was desperate to maintain continuity after Jobs’ death. But Cook lacks the ability of his mentor to pioneer new high-tech gizmos, and Apple’s margins are under pressure from Samsung’s Galaxy smartphones which use the rival Android operating system.

True, Apple’s year-end share price is still up comfortably on when Cook took the helm 16 months ago. But Apple shares have also fallen 30 per cent since September, suggesting market jitters. Prediction for 2013: expect Cook to try pulling an apple out of the hat – perhaps a combined computer-TV.

 

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