Scottish economy facing gridlock in 2012 ‘but will escape double-dip’

SCOTLAND’S recovery from recession has “stalled”, one of the country’s leading economists has warned, after an end-of-year survey of firms showed that hopes for 2012 had deteriorated in recent months.

Professor Donald Macrae warns in the latest Lloyds TSB Business Monitor that growth in Scotland is likely to slow down to “negligible or non-existent” levels in the New Year.

He points to the effects of the global economic turmoil, tumbling consumer confidence, and the slowdown in government spending as the reasons.

However, his analysis suggests that Scotland will narrowly avoid tipping back into a “double-dip” recession, following the slump of 2008.

The full report indicates clearly that businesses across Scotland have massively revised down their prospects for the coming months, with export activity having “plunged” over the past three months, thanks to tough global conditions and the eurozone crisis.

Only one in five of the 411 businesses surveyed said they expected their turnover to increase over the next six months.

The gloomy outlook is in line with economic forecasts for 2012 which have all been revised sharply downwards in the wake of the eurozone crisis.

The Office of Budget Responsibility now expects the UK to grow by just 0.7 per cent in 2012, having previously estimated growth at 2.5 per cent.

In his summary of the latest survey, Prof Macrae warns: “Subdued domestic demand coupled with the global slowdown has hit both services and manufacturing. There is no definite sign of a lapse into a ‘double-dip’ but every indication of an already slow recovery slowing further to the point where growth is negligible or non-existent.”

He goes on: “In the face of slowing global demand, falling business and consumer confidence in the UK and cuts in government spending, the Scottish economy is struggling to maintain growth and momentum.”

The detail in the Lloyds TSB monitor, which is published quarterly, shows a marked change of mood since it was last taken in October.

Asked whether exports would go up, stay the same, or fall, there is a net balance of -17 per cent in the new survey, compared to a balance of +10 per cent in the previous one.

The slowdown is being exacerbated by low levels of consumer confidence, seen in the small number of new car and house purchases. The monitor blames this on high inflation and static salaries eroding people’s spending power.

A Scottish Government spokesman said that its plans to boost capital spending would help boost growth. Next year, ministers are also planning to unveil new enterprise areas and boost broadband coverage.

He said: “Despite a cut of over a third, in real terms, to our capital budget by Westminster, we are acting to ensure that infrastructure investment increases during the spending period.”

However, Scots Tory leader Ruth Davidson said: “This report makes grim reading for Scotland and the stark facts are that 26,000 people are facing their second Christmas out of work.”