Scotland recession latest: Economy is No1 priority, not independence, says business
Experts have warned that Scotland is faced with recession amid reports that the Scottish economy is flagging. Picture: Robert Perry
THE threat of recession is looming again for Scotland, experts have warned, as a raft of new reports paint a gloomy picture of the state of the flagging economy.
THE threat of recession is looming again for Scotland, experts have warned, as a raft of new reports paint a gloomy picture of the state of the flagging economy.
In its quarterly Business Survey, the Scottish Chambers of Commerce claims today that the “fragile” recovery seen in the first half of last year had waned in the final six months of 2011 – and is likely to get worse in 2012.
Government spending cuts, coupled with the instability in the eurozone, have left the Scottish economy in a poor state.
The majority of businesses are pessimistic about their prospects over the next few months, as UK demand for goods and services has weakened and the pick-up in construction seen at the beginning of last year has proved to be short-lived.
Separate figures from the Scottish Retail Consortium (SRC) heralded the worst December trading for shops in at least 12 years, as sales in stores which have been open for more than a year edged up by just 0.4 per cent. Even food sales, which have been driven higher in recent times due to rising commodity prices, 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.
Food sales in the month when many Scots indulge in more eating and drinking than at any other time of year dropped by 0.1 per cent – again the poorest performance on record. Meanwhile, the latest inflation figures from the Office for National Statistics (ONS) showed a figure of 4.2 per cent in December, according to the Consumer Price Index measure – still well above the government’s target level of two per cent, despite a drop from 4.8 per cent the previous month.
The Scottish Chambers of Commerce (SCC) report, compiled in partnership with the Fraser of Allander Institute at Strathclyde University, revealed a Scottish business sector with little chance of imminent recovery, fuelling fears of a return to recession, which is likely to pile even further pressure on jobs. Mirroring the rest of the UK, it is thought that Scotland’s output could have fallen into negative territory in the final three months of 2011 – a trend which could continue into the first quarter of this year.
Two consecutive quarters of negative growth would mean that the country would be officially back in recession.
“For many Scottish businesses, the combination of limited improvements in turnover, rising costs, pressures on margins and declining trends in profitability pose real problems in 2011,” said the report.
“At the end of 2011 we see little evidence in the results to change this view. If anything, our concerns for 2012 are greater and threat of recession more apparent.”
It added: “Demand remains weak as a combination of uncertainty, limited access to capital; reduced household income limits business activity and restricts plans for the future.
“The continuing concerns as to the future of the eurozone, the impact of government spending cuts and reorganisation of public services continue to adversely influence both activity and sentiment in Scotland and in the rest of the United Kingdom.”
Iain McMillan, director of the Confederation of British Industry (CBI) Scotland, said today’s data fuelled a pessimistic outlook for Scotland and admitted he could not rule out a return to recession for the economy.
The figures for Scotland’s Gross Domestic Product (GDP) for the third quarter of 2011 are due out today, while UK-wide GDP figures for the final three months of 2011 will be published next week.
“Certainly, these two Scottish surveys are consistent with our economic forecast for 2012,” he said. “The economy has not recovered in the way that we thought it would at this time last year and recovery is going to take longer than anticipated.”
He added the crisis in the eurozone, as well as a slower-than-expected recovery in the US and fears that China’s booming economy may soon “overheat”, were all having a knock-on effect on businesses north of the Border.
“There is a tendency for even businesses which are doing well to sit on their hands and not invest at this time of uncertainty,” he said.
More than 80 per cent of Scottish retailers reported a slump in sales in the final three months of last year, while declining employment trends were reported in all sectors, which are expected to continue into the foreseeable future.
“We expect another difficult year for the economy. Internationally, the ongoing uncertainty surrounding the eurozone impacts directly on the UK economy and especially on our major export markets,” said Garry Clark, head of policy and public affairs at the SCC.
“Domestically, demand continues to be weakened by tightening household incomes. Consumers are spending less and prioritising expenditure, with the consequences feeding through to both manufacturing and service sectors.”
Mr Clark issued a warning to Scottish politicians to ensure that focus was not distracted from the economic woes of the country by the independence row raging in Holyrood.
“In the midst of the current political debate in Scotland, it is crucial that all our politicians keep their eyes on the economy as the number-one priority,” he said. “2012 will be a vital year for Scottish business and our future prosperity, and it is important to focus strongly on developing the economy.”
Scottish Labour’s finance spokesman, Ken Macintosh, added: “This report, which paints a worryingly bleak picture for Scotland’s economy in 2012, warns of the ‘corrosive effects’ uncertainty is having on our economy. Regardless of the debate about the constitution, the SNP government cannot afford to take its eye off the economy.”
Scottish Liberal Democrat leader Willie Rennie added: “These figures show that it’s imperative that the Scottish and UK governments work in partnership to create the conditions for sustainable growth and jobs.”
Pay increases in 2011 were at historically low levels and well below the rate of inflation, the SCC report revealed, demonstrating real declines in household income.
In the fourth quarter of 2011, pay rises ranged from 1.8 per cent in manufacturing and construction, to 2.5 per cent in retail and 3.5 per cent in tourism.
In a rare ray of optimism, the report said the decline in the number of construction orders had not been as bad as expected – but warned that could be due to damage by the stormy weather at the end of the year.
Fewer than a quarter of firms in the sector increased pay at all in the final three months of 2011, with the average increase coming in at just 1.8 per cent.
An apparent rise in tourism was also offset by heavy discounting – which meant that despite the rise in visitors, spend in restaurants was actually weaker.
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Comments
There are 99 comments to this article
Page 1 of 7
Il Penseroso
Wednesday, March 14, 2012 at 10:31 AM#88 Kon You really take the biscuit! You and I will be well gone before the oil runs out. Being associated with a corrupt Westminster is certainly no reason to stay with it any longer. What gains can you indicate by being part of this outfit? Disastrous foreign policies, criminal wars, a divided society where the rich get rich and the poor, poorer. Can we be proud of the current state of this united kingdom with unemployment, bad health, poverty and death with our Pensioners, shocking life expectancy in many parts of the kingdom, a balance of payment deficits that is frightening and a balance sheet of debt that is the highest in Europe? Now we have been overtaken in the league of trading standards by Brazil. Great stuff if you cannot see reality staring you in the face. The united kingdom is a busted flush!
Il Penseroso
Wednesday, March 14, 2012 at 10:19 AM#15 Cynicus I am no horse expert but I backed Rock on Ruby @ 12 to 1 each way. Half my winnings are going to Jowly Eck. Any tips for the Gold Cup? At this rate Independence is a cert!!
tested
Wednesday, March 14, 2012 at 09:32 AM# 94 Mordor "The structure of Government is inconsequential, what matters is what a Government does". " What a government does is in large part determined by its "structure". The economy is not run on a day to day basis and therefore is more subject to influence by the long term policy decisions of governments. These policy decisions are based on the political make up of the government. However the question in Scotland is not about government structure rather about the future of the country whether as an independent nation or as a part of the UK. That does influence major companies because large companies work in a global market and look to their governments to exert influence on their behalf (even, as some would have it, to the extent of going to war). The global "clout" of a country is, therefore, very important to a large company.
Scotsa
Wednesday, January 18, 2012 at 11:56 PMThe problem is not the economy, the problem is what you're going to do about it. A simple shift in mindset is all it takes to not participate in an economic downturn. Have a listen... http:lnkd.inzyjyVd
panayiotis
Wednesday, January 18, 2012 at 10:44 PM94 MORDOR- has put the matter very well indeed, also working for a large Multinational company as many of my colleagues do I concur, it is not who governs but how.I am afraid that too many of those in the government have a more of a local mentality and do not see Scotland in the big picture.
mordor
Wednesday, January 18, 2012 at 09:04 PMYou will have to excuse me for intervening with some common sense. Should our business organisations, rather than just prophecising doom and gloom, not be making some constructive suggestions? I work in the real world so am fully aware that the picture being painted is very political and more 'economic with the truth' than 'economic'.________________________________________Scottish Labour’s finance spokesman, Ken Macintosh, added: “This report, which paints a worryingly bleak picture for Scotland’s economy in 2012, warns of the ‘corrosive effects’ uncertainty is having on our economy. Regardless of the debate about the constitution, the SNP government cannot afford to take its eye off the economy.” This tells me that Mr Macintosh is completely divorced from reality. Many of us work for multi-national companies who have conducted due diligence on the matter and the response "Not an issue. The structure of Government is inconsequential, what matters is what a Government does". A finance spokesman who knows nothing about the world beyond politics is no use to us who live and work in reality and are reliant upon good governance to ensure that our country can compete in the modern world. All that Mr Macintosh has shown is that he is unfit to fulfil the role that he seeks to have.....deary me, you would think that these people would stop treating us as if we are daft.
CheesyQ
Wednesday, January 18, 2012 at 06:23 PM92 SNP for me. Thanks for clearing that up, so your figure in 89 was speculation then? I think I'll wait for the real figures before I comment, I would suggest you do the same.
SNP for me
Wednesday, January 18, 2012 at 05:49 PMrufus, the equivalent UK figure to be published in next day or two is expected to be 0.1%
Tartancult
Wednesday, January 18, 2012 at 05:42 PMSome days this is better than the Beano.
CheesyQ
Wednesday, January 18, 2012 at 05:29 PM#89 Are you John Swinney? Clearly Scottish GDP has risen more than the UK in the last quarter however it is STILL lower than the rest of the UK. On an annual basis, comparing the latest four quarters to the previous four quarters Scottish GDP grew by 0.9 per cent. That is below the UK growth average of 1.3 per cent.
SNP for me
Wednesday, January 18, 2012 at 05:18 PMI'm confused... earlier today was a report in this very paper detailing a rise of Scottish GDP of 0.4% over last quarter 2011 and 0.9% over the year. The UK figure is 0.1%. I can only conclude that Scotland is performing better in isolation than the UK is as a whole, so why the scaremongering story and headline?
Cuntryman
Wednesday, January 18, 2012 at 05:03 PM73 McDuff, I'm a Scot and a Unionist, Was that all Charles Henry said? The Truth is the treasury gathers monies from many sources, Scottish Oil being one of them. Scottish & English gas being another, coal from around the UK and the various other resources. Not forgetting the largest financial district in the World and it's associated taxation income which dwarfs that of oil by several tens of times. Ask yourself, what percentage of UK income comes from North Sea oil? I think you will see that we gain more from tax receipts (including financial services) than we ever would if we were to own all of the oil and take 70% tax level off at source. The bottom line is the UK is a partnership, you think we're being ripped off, but Scots unionists reckon we are gaining rather than losing from being part of a larger group. Couple that with long term support in the future, beyond the oil drying up and we are in a stable part of the world.
New Unionism
Wednesday, January 18, 2012 at 12:09 PMCould be sub contract out the Scottish economy to a country that knows what it is doing? Clearly the UK does not. Vote YES
noodle doodle
Wednesday, January 18, 2012 at 11:45 AM#73 "To all you Unionists who claim to be Scots" - hurray, it's the 'not real scots' card! All I need is for the quisling chat to start and then i claim house on my cybergnet bingo card. PS a) Scotland's not poor. b)) "If Scotland were independent it would be a wealthy, dynamic,outgoing country instead of the run down crumbling `bottom` of the league nation it is" - well done, you're the winner of today's "golden future of Salmondoon" hyperbole award
salad cream or mayo?
Wednesday, January 18, 2012 at 11:38 AM84 nidependence is either good for Scotland economically, or it is not. If the SNP think it is good for us then they should call the referendum asap. There will always be somebosy saying it is not a good time.
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