Scotland in recession: Alex Salmond looks to London to rescue Scotland’s economy

SCOTLAND has fallen into a double-dip recession with the Scottish Government warning that the country will continue to “bump along the bottom” unless the Treasury pumps in hundreds of millions of pounds to revive the ailing economy.

The desperate state of the construction sector – which shrunk by 7.3 per cent over the year and 6.9 per cent over the quarter – has been blamed for the country’s economic woes.

Industry leaders and First Minister Alex Salmond have now joined forces to call for a

£5 billion UK-wide capital investment package to turn around the decline.

Better news did emerge yesterday, however, as unemployment in Scotland fell for the fourth month in a row. But with 215,000 Scots out of work, this is still more than double the level before the slowdown began to bite in 2008.

Scottish gross domestic product (GDP) fell by 0.1 per cent during the first three months of 2012, following a similar fall in the previous three months. A recession is defined as two quarters of negative growth. Construction fell sharply by 6.9 per cent over the same period, while the production sector grew by 1.2 per cent and services by 0.2 per cent. The economy grew by 0.2 per cent over the year.

Mr Salmond said yesterday that Chancellor George Osborne must now sanction a multi-

billion-pound borrowing initiative which would be pumped into the construction sector and generate a lasting recovery.

“We now need a further Budget U-turn with an impact to make an immediate difference,” the First Minister said.

“We need direct capital spending on shovel-ready projects to the tune of some

£5bn. The Scottish Government would guarantee that our £400 million-plus share would be allocated in this financial year.

“I can’t see any reason why UK government departments shouldn’t be able to do the same thing despite the misgivings of the Prime Minister.

“If the will is there and the means are there then that direct capital investment can have an impact on the economy and we could be looking a totally different vista over he next year.

“I don’t want us to spend another year bumping along the bottom because the Chancellor has yet to find the U-turn that will make an immediate different to the economy.”

The money would come from increased borrowing, which is unlikely to be endorsed by a coalition government committed to driving down the UK’s deficit. Currently, £130bn more is being

allocated to public spending than is raised in taxes.

The last recession hit in 2008 and lasted more than a year. Earlier this week, the IMF cut the UK’s growth forecast economy for the year to just 0.2 per cent.

But a Treasury spokeswoman said plans to support up to £50bn of private investment in infrastructure and exports in both Scotland and the rest of the UK were set out earlier this week.

“The government has already provided Scotland with over £1bn of additional funding, more than £400m capital, since the spending review,” she said.

“The Scottish Government should focus on using these to support the Scottish economy rather than creating uncertainty by calling for a referendum.”