Analysis: Clear economic data will be crucial in the run-up to referendum

By JOHN MCLAREN
Published on 19/07/2012 00:58

THE latest Scottish GDP figures confirmed the on-going stagnation of the Scottish economy. While Scotland is now technically in recession, after two quarters of negative growth, in each quarter the slowdown was the smallest possible, down by only 0.1 per cent.

Essentially, economic output in Scotland has been flat-lining since the middle of 2010. Although Scotland has done slightly better than the UK over the last two quarters, since the middle of 2010 UK output has risen by over 1 per cent, in comparison with Scotland’s show of no growth.

The worst performance over the first quarter of 2012 came in construction, which is down 6.9 per cent, the worst ever recorded quarterly fall for Scotland. After a partial recovery post-recession, construction output has now fallen back to around the levels seen in late 2009 and over 17 per cent down on the peak levels seen in the first half of 2007.

The Scottish Government has said if construction were removed from the figures GDP would be growing. That is true, but it does not explain why it happened or why Scottish construction output fell 7.3 per cent over the year, while the UK is down by only 4 per cent over the same period.

Similarly, Scotland has exhibited no growth in public-sector output in the four years up to the first quarter of 2012, whereas for the UK over this period public-sector output has grown by almost 5 per cent.

Understanding the causes of these differential performances would greatly aid us in thinking about what might best be done to improve the situation.

Where there is more encouraging news for Scotland is with regards to manufacturing, up almost 1 per cent, distribution, hotels and catering, up over 1 per cent, and business services, up 0.5 per cent. While new labour market figures also showed some positive signs, the Scottish employment rate is still lower, and the unemployment rate higher, than a year ago.

Overall, our economic prospects remain poor and the best way to improve them uncertain.

Looking forward to the referendum, the current state of the economic data for Scotland remains inadequate. While we have data for the UK with and without the contribution of North Sea oil, we only have figures for Scotland without any share of North Sea oil. This situation could be easily corrected and should be.

There is also a strong case for Scottish gross national product (GNP) to be published, as it more accurately measures the rewards from economic activity that remain within Scotland.

Without this, the debate leading up to the referendum will be based on incomplete, possibly distorted information.

• Professor John McLaren, of the Centre for Public Policy for Regions at the University of Glasgow.