Terry Murden: Ignore the differences, figures tell same story

It is certainly difficult to find anything cheery in either the Scottish Chambers of Commerce/Fraser of Allander Institute data published yesterday or today’s official GDP figures, Yet, they come against a backdrop of improvements in the US and anecdotal evidence that some Scottish firms are in more robust health than the figures would have us believe.

Perhaps that explains why Iain McMillan, director of CBI Scotland, described the Fraser of Allander data as “pessimistic” while 24 hours later was interpreting the GDP figures as “encouraging”. He may well clutch at any sign of improvement, however flimsy, but muddled reaction doesn’t help anyone.

In fact, comparing the two is fraught with danger. The Fraser of Allander report relates to the fourth quarter while the “latest” GDP numbers are based on the July-September trading period and a lot happened in between, not least the crisis in the eurozone which kicked off in July but worsened measurably between October and December.

So the full impact of the slowdown in the eurozone together with the pressures on the euro are absent from the GDP analysis, which makes the data less relevant to where we are now.

Finance secretary John Swinney naturally attempted to put a gloss on the GDP data, stating that Scotland grew at a “slightly lower” rate than the rest of the UK, but “the best since the second quarter of 2010”.

Well, he’s right. The third-quarter figure of 0.5 per cent compares reasonably with the 0.6 per cent UK rate and positively against a 0.2 per cent rate in Scotland for the second quarter.

But it’s another way of saying the Scottish economy is still in deep trouble and playing catch up with the UK, and there is not much comfort in that.

In truth, Swinney and his Cabinet chums will have a nervous wait ahead of the fourth-quarter Scottish GDP figure, due in April.

If the eurozone worries and the particularly weak data on construction impact on the growth figure as expected, it is likely the economy contracted in the final months of 2011.

Investment banks are feeling the euro-pain

problems in the wider world, essentially in Europe, are making themselves felt in the investment banking world to a point where the whole model is under strain.

When revenue is falling across the board you know things may have to change.

Lower taxes helped Goldman Sachs, the venerable US bank, to beat fourth-quarter estimates, but return on equity – a standard measure of profitability – was poor and the overall decline in business activity – fewer fund-raisings, such as listings – has given analysts and investors little to cling on to in the search for positives.

The decline in traditional business has to some extent been compensated by more work among those smaller businesses which are seeing a pick up in activity. This in itself suggests a shift in the investment banking landscape.

Yet the expected bonus payments due to thousands of employees will grab the headlines. While the pool is sharply lower than last time, there will be some big individual rewards, likely to spark another round of outrage and prompting more finger- wagging towards the British banks as they prepare to follow suit in the next few weeks.

Board pay proposal merits our attention

ON the topic of bonuses, Fidelity’s “open letter” needs to be noted as this is coming from one of the world’s biggest fund managers.

Its suggestion that an annual special resolution be passed on a 75 per cent majority of shareholders is offered as a response to calls for greater transparency on pay, not least from David Cameron, the Prime Minister.

The proposal seeks two key outcomes: the continued ability of company boards to establish what they regard as the appropriate remuneration and greater shareholder input into the process to ensure fairness.

It could help break the current all-too-cosy arrangement and for that reason deserves attention.