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Published on Thursday 17 April 2003 01:00

IT couldn't be worse timing for the Scottish Labour Party. Just as the Chancellor Gordon Brown hit the election campaign trail for the second day, trumpeting the highest level of employment in Scotland for 40 years, the Bank of Scotland's economic predictions take the wind out of their sails.

Their figures for the fourth quarter of the financial year make grim reading, revising the forecast growth down from two per cent to just 0.7 per cent.

This falls far short of even the more circumspect predictions made by Mr Brown in his recent budget, and does nothing to inspire hope that Scotland's economy is going to emerge from its ongoing slump.

The bank's warnings will be manna from heaven for the SNP, especially as business leaders including Sir Tom Farmer are now arguing that fiscal autonomy is the way ahead for Scotland.

Certainly there are concerns that Scotland's economy has been lagging behind the rest of the UK. But it would be simplistic to argue that independence would automatically deliver improvement.

There needs to be a greater understanding from politicians of all parties of the challenges facing Scottish businesses. And they could do worse than look to Edinburgh, an engine of growth without which Scotland's economy would certainly be in dire straits.

Yet in Edinburgh, tens millions of pounds in business rates are collected by the council and redistributed to less successful local authority areas, instead of taking the view that success breeds success.

Virtually full employment also brings its headaches, as Edinburgh employers are also struggling to cope with a serious skills shortage.

And, according to latest figures, there are no signs of a slowdown in the city's property prices. This will make it harder for those on lower incomes to locate to the city.

Facing up to these challenges can only improve the prospects for not only the city's economy, but the whole of Scotland.