Recession fears as Scotland's economy falls into downturn

Scotland's economy has fallen into a downturn with "Brexit uncertainty" blamed for the slowdown.

The second quarter of the year saw output in the construction sector contract by 2.2 per cent. Picture: TSPL

The slump of 0.3 per cent in GDP between April and June mirrors the contraction in the wider UK economy over the same period.

It's believed that many firms had "stockpiled" goods in the months building up to this period to prepare for the original March 31 Brexit date. Whe this didn't happen, economic activity fell as firms used up the goods they had built up in their stockrooms.

If there is a downturn in next three month period, between July and September, it will mean the country has plunged into recession.

Derek Mackay says Brexit uncertainty has caused slowdown

Over the year, compared to the second quarter of 2018, the economy has grown by 0.7 per cent.

Scottish Government Economy Secretary Derek Mackay said: “Given the repeated warnings from business organisations and the contraction across the UK in the same quarter, it is unsurprising, but deeply frustrating that we are now seeing the Brexit impact on the Scottish economy.

"The responsibility for this contraction lies entirely with the UK Government.

“There can now be no doubt that any form of Brexit will damage our economy and a ‘no deal’ Brexit would be disastrous for Scotland and could push the country into recession.

The second quarter of the year saw output in the construction sector contract by 2.2 per cent, while output in production contracted by 1.1 per cent, and output in the services sector grew by 0.1 per cent.

Professor Graeme Roy from the Fraser of Allander Institute said: “In the first three months of the year we saw activity boosted by firms stockpiling supplies in the event that the UK exited the EU at the end of March.

"When this did not come to pass, and the next deadline was pushed to October 2019, we saw firms run down these stockpiles leading to lower levels of activity."

Two sub-sectors of manufacturing - food and drink, pharmaceutical and related industries - account for more than half of the 0.3 per cent contraction of this quarter.

Manufacturing output in these sectors fell back after a strong first quarter.

Scottish Secretary Alister Jack said he was "concerned" over the figures.

"More needs to be done to boost our economy and close the gap," he said.

“I urge the Scottish Government to use the considerable powers at their disposal to improve the Scottish economy rather than holding it back with threats of a second independence referendum and the decision to make Scotland the most highly taxed part of the UK.”