Sturgeon urged to halt indyref2 calls as economy shrinks

The Scottish Government is 'out of touch' and must withdraw the threat of a second independence referendum, critics have said after figures showed the economy shrank in the last quarter of 2016.

Finance Secretary Derek Mackay blamed the fall on continued headwinds including the slowdown in the North Sea oil. Picture: PA

Economic growth in Scotland fell further behind the rest of the UK last year, with GDP growing by just 0.4% compared to 1.8% across the country.

Output fell by 0.2% in the final three months of 2016, the first decline since the third quarter of 2015. The UK economy grew by 0.7% over the same period.

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Finance Secretary Derek Mackay blamed the fall on “continued headwinds” including the slowdown in the North Sea oil and gas industry and the weak global economy.

Finance Secretary Derek Mackay blamed the fall on continued headwinds including the slowdown in the North Sea oil. Picture: PA

“Despite these challenges, the foundations of our economy are strong with growth in 2016, unemployment falling and early signs that the situation is improving for North Sea operators,” Mr Mackay said.

“Before the EU referendum, the UK Government told us Brexit will make us ‘permanently poorer’.

What is now quite clear is the economic reality of the Brexit vote.

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Finance Secretary Derek Mackay . Picture: TSPL

“We have already seen significantly lower consumer confidence in Scotland since the vote last summer.

“Now we see that feeding through into our growth figures and all of this is before the UK actually leaves the EU.”

Professor Graeme Roy, Director of the University of Strathclyde’s Fraser of Allander Institute, said: “The GDP data released today are deeply disappointing.

Finance Secretary Derek Mackay blamed the fall on continued headwinds including the slowdown in the North Sea oil. Picture: PA

“We previously warned that this was a fragile time for the Scottish economy and that a contraction in output towards the end of 2016 was entirely possible. Sadly, these fears have now been realised.

“With the Scottish economy shrinking in the final quarter of 2016, this means that the Scottish economy did not grow at all through 2016.

“At a time when the UK economy grew at 1.8% over the same period, this is a serious cause for concern.

“With any Brexit uncertainty affecting the UK as well, it’s hard to argue that Scotland’s relatively weaker performance can be explained by the outcome of the EU referendum.”

Finance Secretary Derek Mackay . Picture: TSPL

UK Government Minister for Scotland Andrew Dunlop said Scotland’s economy was “now a real cause for concern”.

“There has been no growth over the past year and the gap between Scotland and the rest of the UK continues to grow,” Lord Dunlop said.

“The economy in Scotland has huge potential, but what we need now is for the Scottish Government to use their unprecedented powers to make Scotland more competitive and return its economy to growth.

He added: “Of course, the simplest way to provide more certainty for people and businesses across Scotland would be to take a second independence referendum off the table.”

The GMB union said the figures showed that sluggish growth in Scotland could no longer just be blamed on Brexit, and raised the prospect of a “sleepwalk back to recession”.

GMB Scottish secretary Gary Smith said: “The news is full of political noise at the moment – but underneath all the words is a harsh, tough reality for the people of Scotland.

“These GDP figures show once again how the economy is struggling; unemployment is up; insecure employment is growing faster here; public sector workers and service users are being hit by huge cuts and those cuts in public services will get worse in the years ahead.

“And our politicians seem to be more interested in pursuing their own pet projects than confronting the problem.”

Conservative shadow finance secretary Murdo Fraser said the Scottish economy was “facing a crisis”.

“These are deeply worrying figures which show that Scotland under the SNP is now on the brink of a recession,” Mr Fraser saidl

“Nicola Sturgeon’s Scottish Government must take responsibility for this mess.

“She has made Scotland the highest-taxed part of the UK and created more instability and uncertainty with her threat of a second referendum.

“Now we see the real-life impact of her mismanagement.

He added: “More than ever, Scotland needs a First Minister in charge who gets back to her desk, ends her obsession with a second referendum, and focuses on her day job.”