Scotland’s GDP may now be better than UK but the underlying pattern needs to improve, writes Tom Peterkin.
Pity poor old Keith Brown. For months he had been getting it in the neck for Scottish growth lagging behind the rest of the UK.
When he was Economy Secretary, Mr Brown was constantly having to fend off criticism about Scotland’s poor economic performance relative to the other nations of the UK.
Just his luck that as soon as he quits the Cabinet in Nicola Sturgeon’s brutal reshuffle what should happen? That’s right, the day after Mr Brown left the Cabinet new figures emerged showing that Scottish GDP is now above that of the UK. Wow, talk about instant results.
The timing of yesterday’s release of the latest GDP figures and Mr Brown’s departure did not go unnoticed at Holyrood.
Some “wits” thought it was perhaps time to update Adam Smith’s Wealth of Nations. Forget the theory of the invisible hand.
The only economic measure worth considering is that of Nicola Sturgeon’s foot – particularly when she uses it to kick an Economy Secretary out the door.
Tempting though it is to link Mr Brown’s political fate with Scotland finally doing a little better than the UK in terms of GDP, things are not quite as simple as that. Therefore, any enterprising economists can be spared the task of re-writing Adam Smith’s masterpiece for the time being.
As Mr Brown would be only too keen to point out, yesterday’s figures recording Scottish GDP at a higher level than the UK were for the first quarter of this year – a period from January to March when he was very much in office.
Meanwhile other politicians were falling over themselves to welcome the news that GDP in Scotland grew by 0.2 per cent, compared with 0.1 per cent for the UK as whole. Finance Secretary Derek Mackay, who has taken over Mr Brown’s economy brief in an enlarged department, declared that Scotland’s economy was “strong”. While Scottish Secretary David Mundell said it was “good” that Scotland’s economy was growing.
An optimistic outloook is always to be commended, but the unvarnished truth is that, regardless of our position in relation to the rest of the UK, Scotland’s economy is growing at a pretty piffling rate.
To put it in context, Scotland’s GDP growth actually fell to 0.2 per cent from 0.3 per cent the previous quarter. At the risk of sounding too gloomy, Scotland (and the UK) is perilously close to negative growth – two successive quarters of which puts a country into recession.
Moreover, Scotland’s apparently strong position relative to the UK has resulted from declining growth rates south of the border. The UK figure of 0.1 per cent was down from 0.4 per cent. Regardless of what spin politicians choose to put on yesterday’s data, growth is failing to take off and businesses and households are still struggling.
According to Scottish Trends, run by the economist John McLaren, measures of standards of living have shown no improvement. In his analysis of yesterday’s GDP figures, Professor McLaren points out that GDP per capita – a measure of standard of living – has experienced no growth over the past three years.
That compares with a modest rise (one per cent) in GDP per capita experienced in the UK over the same period. Such statistics offer little comfort to struggling families making do with stagnating pay packets and rising costs.
Politicians were keen to talk up the sectors of the economy which put in a more encouraging performance.
Thus Mr Mackay made much of the service sector growing 0.4 per cent in the first quarter of this year as well as the 0.9 per cent growth in manufacturing. Of more concern, however, were the dismal statistics in the construction sector. Construction output fell by 3.5 per cent in quarter one.
With Scotland basking in a heatwave, the horrendous blizzards experienced at the beginning of the year seem a long time ago. But the Beast from the East was blamed for the poor performance of construction between January and March.
However the terrible weather fails to mask the underlying pattern. The fall in construction output was – as Scottish Trends pointed out, the ninth consecutive quarter of decline – down 9.2 per cent over the past year. Nevertheless, economists and politicians are hopeful that the second quarter will see a revival thanks to the relatively strong service sector and manufacturing.
Even so, Scotland and the UK are still some way behind their competitors when it comes to growth. The GDP figures are put into perspective by the European Union’s GDP of around 2.4 per cent, a figure that is dwarfed by the likes of China (around 6.8 per cent) and India (in excess of seven per cent).
But with Brexit adding to economic uncertainty, what hope is there of reviving an economic performance which has been lacklustre – to say the least – since the economic crash of a decade ago? The answer, according to Liz Cameron, of Scottish Chambers of Commerce, is for Ms Sturgeon’s new Cabinet to bring a “renewed vigour” to the challenge.
Renewal of infrastructure to stimulate the construction sector was suggested by Ms Cameron as one course of action available to the Scottish Government.
That challenge falls in the main to Mr Mackay.
Mr Mackay has also to persuade more people to invest in Scotland, a goal which may prove challenging given his government’s tax-raising instincts.
If only it was as simple as reshuffling a Cabinet.