Recession fears as 110 Scots building jobs lost every day

Scotland’s economy is “teetering on the brink” of recession after growth fell for the first time in almost two years.

A slump in the construction industry, which shed an estimated 10,000 jobs, led to growth of just 0.1 per cent during the second quarter of 2011, down from 0.2 per cent in the previous three months.

Scotland is now lagging behind the UK as a whole, with annual growth for the year till the end of June of 1.1 per cent compared with 1.5 per cent UK-wide over the same period.

The news capped a day of economic gloom for First Minister Alex Salmond, as it emerged that Scotland has seen a dramatic 46 per cent rise in businesses going to the wall last year.

A report by the Scottish Chambers of Commerce (SCC) also indicates that the fragile recovery is stalling, with business confidence weakening as growth slows in major export markets.

It emerged last week that unemployment had jumped by 7,000 in Scotland, with the total number out of working reaching 212,000.

A fall in unemployment the previous month had prompted Mr Salmond to hail the success of the Scottish Government’s economic approach and call on George Osborne to adopt a Scottish-style “Plan MacB” on economic growth.

But the SNP government’s own economic programme came under attack from business leaders yesterday.

CBI Scotland director Iain McMillan, said: “Scotland’s economic recovery is tepid and lacks any discernible vigour and momentum, with expansion in some sectors being offset by weaker performance in others.

“That is why we continue to argue that the Scottish Government’s spending plans should be improved in order to better galvanise growth.”

Mr McMillan called on ministers to scrap plans for a £110 million tax on major supermarkets and a new levy on empty commercial premises. He said: “The devolved administration should be doing everything possible to make it easier and more attractive for businesses to invest and create jobs in Scotland, not more expensive.”

The construction industry has been the biggest casualty: the sector shrank by 2.3 per cent, following a contraction of 2.9 per cent the previous quarter.

Scottish Building Federation chief executive Michael Levack said the figures were “deeply concerning” and should act as a “wake-up call”.

He said: “It translates as around 10,000 jobs being lost in just three months.

“The construction industry is a key driver of Scotland’s economy, but we are continuing to suffer a prolonged slump.

“We need to see an even stronger emphasis from the Scottish Government on protecting and consolidating capital investment to support the construction industry and start rebuilding employment.”

Growth of 1.7 per cent in the production sector helped the minimal expansion of the economy, following a decline last quarter. This was largely driven by strong growth in electricity, gas and water supply (12.4 per cent) and growth in manufacturing (0.2 per cent).

Finance secretary John Swinney renewed calls for the UK government to adopt a “Plan MacB” to ensure that growth was not derailed in Scotland by the coalition’s “wrong-headed” economic policy.

“This must deliver real action in the areas where Scottish Government policy is making a difference – increased capital expenditure, improved access to finance for small businesses, and the introduction of measures to boost consumer confidence,” Mr Swinney said.

“The Scottish Government is using all of the economic powers at our disposal to secure new jobs and investment, and strengthen recovery.”

Scotland’s economy sunk into recession for the best part of two years during 2009 and 2010. The drop in growth in the second quarter of the this year marks the first fall since late 2009.

Labour finance spokesman Richard Baker said: “These figures show Scotland teetering on brink of recession and that the economy is actually going backwards. The SNP’s economic plan simply isn’t working.

“For the last 12 months, the Scottish economy has grown even more slowly than the rest of the UK. Far from the SNP’s Plan MacB working, it is actually making things even worse, with rising unemployment and fears for key sectors.”

Liberal Democrat deputy Scottish leader Jo Swinson added: “The figures compared to the rest of the UK cast real doubts over the claims by SNP ministers to have created a successful ‘Plan MacB’.”

Today’s report by the SCC finds that business optimism declined across all sectors between July and September, reflecting growing uncertainties as to the economic recovery. Most wholesalers and retailers reported pessimism concerning trading conditions.

Garry Clark, head of policy and public affairs at the SCC, said: “The world economy has suffered a series of serious shocks over the past few months, and it is evident that domestic growth has been stagnant for much of the year.

“The priority for the Edinburgh and London governments must be to act to secure the best possible prospects for higher long-term rates of growth in our economy and to support those businesses which have the capacity to succeed.”

Mr Clark added: “Action to reduce the deficit is necessary, but we must still invest for future growth of our businesses and our economy.”