Comment: No sign of return to trend growth

NEXT week sees the publication of the latest Scottish gross domestic product (GDP) figures, for the last quarter of 2012. As ever, this data is incredibly dated but at least we will have some hard numbers to play with – Wales and the English regions get no quarterly growth statistics whatsoever.

However, the latest Scottish business confidence surveys paint a picture of a private-sector economy holding its own in difficult times, though there is no sign of a return to trend growth (circa 1.5 per cent).

This week’s survey from the Scottish Chambers of Commerce (SCC) – covering 2013 Q1– says the economy is “continuing to bump along a path of little or no growth”.

The SCC puts this down to lack of demand, a problem that will only be exacerbated when Chancellor George Osborne axes a further £1.6 billion from Scottish welfare transfers.

Yet the report contains glimmers of hope: an up-tick in confidence in manufacturing exports and construction, and signs of increased life in tourism.

This reinforces the gently optimistic findings of Bank of Scotland’s latest business monitor. This indicates a modest rise in the number of firms reporting increased turnover, though the majority report a static situation. Confidence in the next six months is also up.

According to the bank’s chief economist, Donald MacRae: “Despite the apparent poor performance in autumn, business expectations for 2013 have improved from a low position.”

The hardest data we have regarding recent Scottish economic performance is from the labour market.

Unemployment in Scotland fell by 4,000 to 200,000 between November and January, compared with a rise of 7,000 for the United Kingdom.

This news suggests that moves by the Scottish Government to front-load capital spending and to mitigate the effects of welfare cuts on domestic consumption are meeting with a degree of success.

We can’t export more if our wings are clipped

Britain’s trade deficit is dire, implying we are not exporting ourselves out of stagnation. The trade gap in February widened to £3.6 billion, up from January’s £2.5bn.

UK exports to the United States actually fell, though the American economy is growing. Worse, exports to non-European Union countries plummeted by 4.7 per cent.

And this despite the Bank of England’s not-so-secret plan to devalue sterling.

This poor performance has nothing to do with exchange rates or finance. It is simply that the UK does not make enough things that foreigners want to buy.

I was in Nepal last week working with Yeti, the local airline. They fly BAE Systems Jetstream 41s, which were manufactured at Prestwick in the 1990s. BAE Systems at Prestwick still provides technical support for Yeti’s planes.

Everyone says the Jetstream is perfect for the job. Alas, in 1997, BAe (as was) cancelled production after only 100 had been built, in its risky move to concentrate on military business.

This abandoned the market to companies such as ATR, Bombardier and Embraer who went on to sell thousands of their own aircraft. QED.