Bill Jamieson: We have nothing to fear but fear itself

Against all expectations, and certainly against the mournful dirge of news and current affairs reportage, might Scottish business be doing better than expected?

Edinburgh is already buzzing with tourists weeks before the festivals. Picture: Lisa Ferguson

Last week a prominent Scots entrepreneur came to lunch. I had been braced for a harangue about our economic woes, the miserable state of business, the uselessness of our planning authorities.

But what he said surprised me. This economy, he insisted, is doing rather better than is widely represented. “Look under the radar,” he urged. “You’ll find a rather different story to the constant misery and negativity being churned out.”

I am inured to this sort of thing. In business journalism we are trained to be sceptical. We’re meant to spot the downsides and the wobbly rivets. A business doing well? Don’t give me sunshine. Tell me when the next rain’s going to fall.

As for entrepreneurs, are they not eternal optimists? They wouldn’t risk a bawbee otherwise. And doesn’t he watch the nightly news about all the Brexit haggles and uncertainties? The dither and delays? The global trade tensions? The poor manufacturing data? The sluggish earnings growth? The high street retail disasters? The rising oil price?

All real and all too true. No-one could confect a ‘good news’ story out of that. But under the radar – and indeed, even emerging above it – there is a parallel truth.

Last week the Fraser of Allander Institute – never a front line member of the happy-clappy gospel choir – came out with forecasts more optimistic than the government’s official forecaster, the Scottish Fiscal Commission. Researchers cited a strengthening oil and gas sector and robust global economy. A “pick-up” in household and business confidence was also a key factor in the report’s optimistic assessment.

John Macintosh, tax partner at Deloitte, said: “There are some encouraging signs that Scotland’s economy is improving and will perform better this year than last year. Some of Scotland’s exports, particularly food and drink, are showing strong growth, and sentiment in the oil and gas sector, which is emerging from a hugely challenging time, has returned to its highest level since spring 2013.”

Meanwhile Edinburgh, Aberdeen and Inverness are buzzing with tourists from around the world. Anecdotal evidence suggests that our tourism and visitor sector is having an excellent summer. Ferries to the Western Isles, Arran and Bute are heaving. Our nearby hotel in Lochearnhead is almost fully booked for the season and celebrity chef Tom Lewis’s Mhor 84 by Strathyre is chock-a-block.

The Scotch whisky industry is on a roll. The current level of investment in distilleries hasn’t been seen for over a century. With 10 new distilleries set to open in 2018, this decade is on track to witness the largest number of openings in history.

Scotch whisky exports hit a record high last year with sales reaching £4.4 billion – the equivalent of more than 1.2 billion bottles. Scotch sales grew in volume by 1.6 per cent and in value by 8.9 per cent. Scotch whisky now accounts for more than 20 per cent of all UK food and drink exports.

Last week the Bank of England’s Monetary Policy Committee held interest rates at 0.5 per cent – but signalled that a rise may not be far off. Latest pointers, it said, suggested that the weakness in the first three months of the year was likely to be temporary and growth forecasts for the April-June quarter are being nudged up to 0.4 per cent.

We have near record lows in unemployment and numbers in work at a record high. Consumer spending is recovering. The MPC said the downside risks to consumption had “dissipated” and that modestly strengthening consumer spending supported by gently rising real income growth is still likely. This belief was reinforced, according to the MPC, by recent survey evidence “corroborated by intelligence from the Bank’s Agents”.

There’s upbeat news – at last – from Scottish retailers. Last month they recorded their best monthly performance in more than four years. The Scottish Retail Consortium (SRC) said sales of garden furniture, barbecues and summer clothing, footwear and food all performed well.

Total sales in Scotland rose 2.6 per cent compared with May last year and are the highest since January 2014. Food sales were up 4.2 per cent, while non-food sales grew 1.4 per cent, against a fall last year of 3.8 per cent. SRC director David Lonsdale said the figures were a “balm for hard-pressed retailers”.

What of government borrowing – normally the cue for a deeply depressing dirge? Last week came news that the public finances continued their encouraging start to fiscal year 2018/19 with a much improved year-on-year performance in May. The £5 billion deficit figure for Public Sector Net Borrowing excluding banks was down from £7 billion a year earlier. Overall, the budget deficit amounted to £11.8 billion in April/May, down 26 per cent on the same period last year.

Government receipts last month were helped by a strong 7.5 per cent rise in income tax receipts – clearly benefiting from strong employment growth, while there was also a marked 5.4 per cent rise in VAT receipts, reflecting healthy growth in retail sales.

Personal finances, too, appear to be healthier than widely thought. A report from the Resolution Foundation last week revealed that the amount of wealth owned by Scots households has broken through the £1 trillion mark due to increases in property values and pension pots. The median Scottish household – with half the country more wealthy and one half less so – was found to have £237,000 in wealth, close to the £259,000 for Britain as a whole.

The figure may not bring much comfort given income disparities. But at least we have moved on from the lament, commonplace a decade or ago, of a “pensions crisis” and warnings that pension savings would fall far short of the total needed to escape poverty in old age.

All sorted, then? Of course not. The Scottish Parliament’s Economy, Jobs and Fair Work Committee looking at economic performance identified a “fear of heights” – a reluctance among business to take risks. Who can blame them given the daily diet of miserable news? But there’s another truth: many are getting down and getting on with it. Thank Heaven for that.