Comment: Scottish economy shadows rise and fall of UK

THE latest bullish figures from the Federation of Small Businesses (FSB) and a Bank of Scotland purchasing managers’ index are being used to prove that the Scottish Government’s policies are working, and by the Yes campaign to similarly confirm that Scotland can punch above its weight.

Terry Murden. Picture: Ian Georgeson

But couldn’t the same evidence be used by supporters of the Union? After all, if the Scottish economy is doing well under the current regime isn’t it because it benefits from being part of the UK, and not in spite of it?

The Scottish Government argues that it has introduced specific measures, such as business rates relief, that have enabled the Scottish economy to outperform. But by crowing over its apparent achievements within the Union, it is in danger of undermining its case for more powers.

Of course, it claims that with even more powers it could achieve even greater success. But by doing so it ignores the fact that the Scottish economy is reliant on what is happening elsewhere – not least in the rest of the UK.

The Holyrood spinners have been hard at work attempting to claim credit for Scotland’s growth which in reality is only a part of the whole story. Declaring the FSB’s confidence monitor to be at an all-time high is correct, but the measurement only began in 2010 in the depths of recession. And the FSB said only that confidence now “matched” that of the rest of the UK as opposed to the Scottish Government’s claim that it “now stands above the UK average”.

Bank of Scotland revealed that jobs in Scotland are being created at their fastest rate in 16 years. But its parent company, Lloyds Banking Group, reports similar growth in confidence across the UK. The British Chambers of Commerce expects the UK economy to pass its pre-banking crisis peak in July – two years earlier than expected.

Because of the interdependence of the UK economy, much of the new demand now benefiting Scottish factories and service-related businesses will be coming from south of the Border.

Indeed, two-thirds of Scottish exports go to the rest of the UK and we have been reminded recently that the vast majority of the customers of many of Scotland’s biggest companies are outwith its borders. The idea that the Scottish economy is somehow self-determined is fanciful, particularly when it does not have the ability to dictate its fiscal and monetary policies.

The Scottish economy’s umbilical link to the rest of the UK and, indeed, to the global economy, will mean it will grow or shrink in relation to external, rather than internal, influences: the condition of the European Union, other developed nations and emerging markets, raw material costs, taxation levels, investment from overseas, and so on.

This will remain the case, whether or not Scotland gets more powers.