Across manufacturing, production and services in Scotland there is one quality in which we are in dire need: momentum.
Our overall economic performance measured by GDP may be better than the UK overall. But the 0.3 per cent expansion rate in the final quarter of 2018 is sluggish by previous standards and masks a 0.9 per cent fall in production over the same period. Meanwhile, the continuing gain in numbers employed has yet to lift household confidence to a level approaching “feel-good”.
Fine weather over the Easter period has helped to lift retail sales and spirits. But we are going to need something more substantial than this – in particular, momentum of improvement in business confidence and investment to lift us out of the trough of political and constitutional uncertainty.
And that trough is deep. The latest Scottish Chambers of Commerce Quarterly Economic Indicator survey for the opening three months of 2019 showed the health of the Scottish economy weakened considerably in this period. Key industrial sectors experienced an investment slowdown as business costs and Brexit preparations took priority. Investment performance was lower in every sector year on year except construction, while investment intentions remain subdued, with a “wait-and-see” approach to spending.
On business confidence, it found the level of business optimism lower across all sectors except retail compared to the previous quarter. Manufacturing has been particularly badly hit, as confidence dipped to the lowest level recorded for the sector since 2012.
And last week brought latest figures from insolvency and restructuring trade body R3 showing the number of corporate insolvencies in Scotland rose by 34 per cent in the January-March quarter compared with the immediate previous quarter (October-December 2018). On an annual comparison, insolvencies are up 8 per cent.
This, says R3 vice-president Duncan Swift, continues a long-standing trend. “Many distressed companies, especially in the retail and restaurant sectors will have put their heads down and tried to get in as much cash as possible over the busy festive period – leaving difficult conversations about future options to the cold light of the New Year.”
Scottish consumer confidence, he added, saw a further notable drop in the first quarter. House price falls in some areas have also worked to make people feel worse off, and perhaps less inclined to spend on non-essentials. “Unsurprisingly, Brexit is still making an impact on Scottish businesses as they put off investment in new equipment or processes, or build up stockpiles of essential supplies to insulate themselves from possible shocks”.
Why is it that Scotland should find itself any harder hit by Brexit uncertainties than the rest of the UK? It may be that we are relatively more dependent on trade with the EU and thus more apprehensive about the immediate Brexit effects. Farming and tourism are also more dependent on sustained migrant labour from the EU. And while there has been growth in tourism and leisure spending, there is a limit to how many coffee shops and café bars our major cities can sustain.
“Right now,” declared Liz Cameron, the SCC’s chief executive last week, “businesses need the certainty and stability that will underpin the confidence to invest, and it is the role of our governments to provide it.
“There are real and present business issues holding back the growth of Scotland’s economy. That’s why our priorities are clear: greater strategic infrastructure investment, developing our skills and talent to overcome Scotland’s productivity challenges, a fair and competitive business taxation environment and expansion of international trade opportunities. These are the priorities for business and must be for our governments too.”
On that worthy perspective, how might the prospect of a second referendum on independence within two years, as advocated by First Minister Nicola Sturgeon last week, lift business confidence and spirits? This would seem to add another layer of constitutional uncertainty – as if the exasperating miasma of Brexit was not enough. In a sentence of deft and sinuous ambiguity, Liz Cameron adds that the SCC’s network “will continue our process of engagement with business communities to understand how the prospect of another referendum on Scotland’s future could affect their ability to grow, create new jobs and invest”. Good luck with that – though I suspect the response is already clearly audible to all but the chronically hard of hearing.
We are in need of a sense of direction out of the trough – a route map to progress. And here at least is a light to guide as. Scottish Futures Trust, set up ten years ago to oversee spending on roads, schools and hospitals in the wake of much-criticised PFI projects – has just published its five-year corporate plan setting out how private and public sectors can best combine to achieve greater cost-effectiveness in infrastructure spending.
Readers may be forgiven a debilitating sense of déjà vu – or déjà lu – ploughing through the all-too-familiar buzzwords and phrases such as National Infrastructure Mission, better insulated, de-carbonised buildings, 5G technologies, electric car charging points, roll-out of masts to increase mobile hot spots and general digital and high-tech improvement.
Such a programme should surely be well-embedded by now and not require an as-new statement of intent. But making better and more intelligent use of publicly owned assets and buildings as technology improves is an imperative that requires constant appraisal and commitment. The plan seeks to promote infrastructure technologies that allow buildings to be virtually built to help flush out any design flaws before moving the building into the construction phase, and to make best use of the buildings we have through effective and joined-up use of buildings.
It cites examples of where services can be located in hubs such as Anstruther where there is a link-up of secondary school, leisure centre, library, college, police station and public access point for council services. We now have 40 of these, and more are to follow.
There is much here that is ambitious and sets an impressive pace for digital development in housing, roads, schools and public services. Here at least is a clear sense of momentum – of where we need to go and how to get there. Let’s hope SFT’s vision is translated into public-private action.