Leader: Economic gloom must not blind us to positive potential

Published on Wednesday 18 January 2012 01:24

ON ALMOST any measure, Scotland’s economy is in a dark place.

The Scottish Chamber of Commerce warns in its latest quarterly survey that the fragile recovery seen in the first half of last year fell away in the final six months and that output in Scotland could have turned negative in the final quarter – a trend that looks to have continued into the first three months of this year. Two consecutive quarters of negative growth would mean that the country would be officially back in recession. Certainly few would dispute the SCC’s assessment: “For many Scottish businesses the combination of limited improvements in turnover, rising costs, pressures on margins and declining trends in profitability pose real problems… Our concerns for 2012 are greater and threat of recession more apparent.”

Separately the Scottish Retail Consortium reported the worst December trading in at least 12 years. Sales on a like-for-like basis edged up by just 0.4 per cent. Even food sales struggled as shoppers looked to discounted and promotional products. The overall rise was the worst since the SRC began to collect retail data in 1999.

Recession may no longer be “looming” in Scotland, but already here. Earlier this week the ITEM Club warned that global uncertainty has put the overall UK economy on hold. It believes the UK is now in a “technical” recession, and even if the eurozone crisis is resolved promptly, it does not foresee a recovery getting under way until the autumn, and even then unemployment will be heading towards a peak of three million expected next year. Support for this view is expected to come with unemployment figures today.

Grim though all this is, there are key points that should pull us back from a wholly negative outlook. First, inflation is on the wane. The Consumer Price Index has fallen from a 4.8 per cent rate of increase in November to 4.2 per cent last month, the sharpest contraction in more than three years. The Bank of England predicts that the rate will continue to decline steeply over the year and will fall below the 2 per cent target by the end of 2012. This should help bring relief to hard-pressed households.

Second, while return to recession is clearly a setback, neither the pace of decline nor the forward-looking indicators suggest the severity of deterioration experienced in early 2009. This looks set to be a short and shallow recession even though there is little prospect of a dramatic bounce. Tough though it is for high street retailers, internet sales are continuing to expand.

Bank balance sheet repair is continuing. And for manufacturing, there is some positive news. The Scottish government yesterday announced four enterprise areas to target the sectors with the greatest potential for growth and new jobs. Given all the challenges ahead it is vital that the economy should be accorded number one priority by the Scottish government and by parliament in the period ahead.

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mordor

Wednesday, January 18, 2012 at 09:28 PM

I am a big fan of the way the new enterprise zones have been done. A concentration on growth sectors rather than areas is most welcome.

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Brond

Wednesday, January 18, 2012 at 08:51 AM

http:www.business7.co.ukbusiness-newsscottish-business-news20120113insider-survey-shows-remarkable-recovery-for-scotland-s-top-500-companies-106408-23697775_____________________________Interesting article on the Scottish Top 500 companies. It states: "Scotland's Top 500 companies have made a dramatic recovery according to Insiders new survey of the country's best performing large firms with a huge rise in profits and a healthy increase in turnover.___________Total turnover for the Top 500 - excluding figures from the Royal Bank of Scotland and Lloyd Banking Groups HBOS subsidiary which can make a huge difference to the picture simply because of their massive size - rose by seven percent to £146.85bn while profits soared by 38.9 per cent from £9.67bn to £13.34bn.________________With the two banks included the Top 500 profits nearly doubled from £5.05bn to £10.98bn though turnover was barely up from £202.14bn to £202.48bn.___________Overall 462 companies made profits this year compared to 437 in 2011 and just 432 in 2010. Some 299 companies showed growth in profits while 181 suffered a slump.____________________The trend for loss making changed dramatically with just 38 companies making losses compared to 63 in 2011 and 68 in 2010._____________A total of 50companies went from loss into profit with another 13 slipping into the red.___________________Some 11 companies made bigger losses than last year and 15 companies in the red made a smaller loss than the previous year.________________Total employee numbers for the Top 500 fell by 53,878 to 778,609 with 22,464 of them being shed by the two banks though many redundancies were outwith Scotland.________________________Just over half the Top 500 companies increased employee numbers while 44 per cent shed jobs and just 2.9per cent were unchanged.__________________________Other big job shedders included Scotsman owner Johnston Press, which cut 626 jobs, and life and pensions group Aegon, which made 602 people redundant."

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Beachdair

Wednesday, January 18, 2012 at 02:45 AM

Mr Editor - Thank you for being realistic and not screaming about how independence planning and negotiations should be totally suspended until the economy improves. Not everyone has a one-track mind.

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