Govan matters, but Scotland’s economy has many positives currently working in its favour, writes Bill Jamieson
GOVAN takes a hit – but the yard is spared. Another round of some 800 shipyard job losses at Govan, Scotstoun and Rosyth is mingled with relief that outright closure at Govan has been averted and an order for three offshore patrol vessels is in prospect.
Coming so soon after the threatened closure of the Grangemouth refinery plant, we are sharply reminded of our vulnerability. Nothing seems sure or to be counted on. The very prospect that Govan might close stirred widespread apprehension. We may be in a services-driven economy in which traditional shipbuilding plays an ever-shrinking part, but that does little to assuage fears of the loss of a history, heritage, skill sets and the livelihoods of thousands of Clydeside workers. Govan was always more than an icon. It is an integral part of Scotland’s story. But so, too, is shipbuilding for Portsmouth, where BAE Systems is to end such work altogether. Here some 940 staff and contractor posts will go at the site, which will, like Falmouth, retain repairs and maintenance work.
The cuts have been dictated by a gaping hole in Ministry of Defence orders after work on two giant aircraft carriers is completed. But the economic rationale is inevitably viewed through the prism of politics – two marginal constituencies in the Portsmouth area weighed against the furore in Scotland that would have followed a decision to close Govan: pure political dynamite in the approach to the independence referendum.
But already English MPs are protesting that Portsmouth and English jobs have been sacrificed on the altar of the Scottish referendum.
It had seemed that Alex Salmond would emerge a winner whichever way the BAE decision went. A Govan shutdown would boost his argument that the London government does not stand up for Scottish interests. But, at the same time, a decision to save the yard and the promise of more work could be seen as evidence of the potent power of the SNP in safeguarding Scottish interests.
However, this furore should not obscure two worrying facts: first, the grim reality that we are not the nation we were and cannot afford a Royal Navy warship building programme on a scale that would sustain current employment across the UK shipbuilding industry. The second is that we have not been as successful as we ought to be in winning overseas non-defence related shipbuilding work.
With ferociously competitive Asian shipbuilding, the cost pendulum for basic construction has long swung against UK yards. But there is much we can do by way of leading design and high-end technical and electronic engineering. A bigger export push, helped by the 20 per cent fall in sterling over the past three years, should give Govan and other yards a fighting chance.
And all this needs to be put in context. Govan and all the history, reputation and skills it represents still has great resonance for us. But the fact is that while Govan has survived through the decades, our economy has changed greatly. The service sector, long our biggest employer, now accounts for more than 70 per cent of gross domestic product. And business services are an ever-growing component. This is where the pulse of Scotland’s economy is at its strongest. And it is to here we look for future growth.
A list of encouraging announcements last month was headed by news of plans by Teleperformance to create up to 1,000 jobs in Airdrie, Erskine, Glasgow and Kilmarnock. Ascensos, a new call centre company, hopes to create up to 600 jobs over the next three years, with an initial 100 in Motherwell.
Other new job announcements included CGI, an information technology firm, with 250 in Glasgow; Aquira, a marketing and sales firm, with news of 220 jobs in the city; Aegon, the pensions group, with 100 in Edinburgh and Caledonian Aviation, 20-30 new jobs in Prestwick.
Various companies announced new investments, including Grahams, the dairy company, in Bridge of Allan, malt whisky distilleries in Glenrothes and Glasgow and DLF-Trifolium in a £3 million grass seed facility in Broxburn.
Last week, Scotland’s Chief Statistician released figures showing the total number of private sector enterprises in Scotland is now reckoned at 343,105 – up 1,745 on a year ago and the highest level recorded.
Small firms (0-49 employees) accounted for almost all of the rise in the total number of enterprises, and 73 per cent of the increase over the year to end-March was due to an increase in unregistered businesses (ie those not registered for VAT and/or PAYE).
And, overall, the economic outlook for Scotland is strengthening. Today, the Centre for Economics and Business Research (CEBR) reveals that it has revised up its forecasts and expects the economy in Scotland to expand next year at its fastest rate since 2007. It now predicts that the Scottish economy will grow by 1.4 per cent this year and by 2.2 per cent in 2014 – up from a forecast of 1.3 per cent previously and markedly more upbeat than the Fraser of Allander’s pallid prediction last week of 1.8 per cent.
What’s behind the higher forecast? A strong increase in consumer confidence, says the CEBR’s senior economist, Rob Harbron, alongside a reduction in the household saving ratio, has also helped to contribute to the brighter growth outlook. Overall, its latest forecasts imply that Scottish output will surpass its pre-financial crisis (2007) peak in real terms in 2014, and stand some 8 per cent higher than the previous peak by 2018.
It is the business services sector, comprising almost one-fifth of the economy, that is expected to drive growth over the coming years. Its pick-up in speed is expected to come alongside a reduction in the importance of oil extraction.
CEBR is also lifting its forecasts for Scottish employment growth over the coming year. For 2013 as a whole, employment is projected to be 2.4 per cent higher than a year before and for 2014 it sees further growth of 0.8 per cent. This new forecast now means that the Scottish unemployment rate is projected to fall from an estimated 7.4 per cent on average this year to 6.1 per cent by 2018.
Harbon believes Scotland’s economy “has clearly turned a corner in 2013. It’s very encouraging to see relatively high levels of business and consumer confidence returning to Scotland, which are expected to help boost growth in 2014. Although pressures from government cuts remain on the horizon, Scotland looks to have escaped the weak growth conditions seen over much of the past five years.”
This is a positive assessment, albeit with caveats about job contraction in Scotland’s large public sector. And it would be even better were business investment and bank lending to companies, particularly to small- and medium-sized enterprises at a higher level and one more typical for an economy at this stage of recovery.
There is much to do to help strengthen a more balanced recovery and one more driven by export growth. On this perspective, Govan matters – but the wider economy even more so.