It is no secret that the Scottish economy is in a precarious state, with growth lagging behind the rest of the UK. But official figures published yesterday make clear the extent of the challenge facing the country.
While the UK economy as a whole grew by 0.7% in the final quarter of last year, output in Scotland contracted by 0.2% over the same period.
Scottish Government statisticians found output was flat in the service sector, and down in the production and construction sectors by 0.9% and 0.8% respectively.
By any objective measure, these figures paint a disconcerting picture of the nation’s fiscal health. Professor Graeme Roy, director of the Fraser of Allander Institute economic think tank, described the Scottish GDP figures as “deeply disappointing,” and said they gave “serious cause for concern.” The GMB Scottish secretary, Gary Smith, described the figures must act as a “wake up call.”
Others, such as Scottish Liberal Democrats leader, Willie Rennie, have gone further in their criticism, summoning up the dreaded ‘R’ word. That would represent the worst case scenario, but it is a prospect that cannot be blithely discounted; if GDP figures for Scotland over the period of January to March this year also show output shrinking, the country will officially be in recession.
In its response, the Scottish Government has identified one core factor behind the statistics. The numbers, said finance secretary, Derek Mackay, reflected the “economic reality” of last year’s Brexit vote.
While that decision, and the resultant process, has had some bearing on the country’s finances, it is disingenuous of Mr Mackay to single out the decision to leave the EU.
The difference between economic performance in Scotland the rest of the UK is considerable, and regardless of how different regions cast their vote, no part of this island of nations is immune from the aftershocks of last June’s referendum.
Mr Mackay also pointed to the slowdown in the oil and gas sector as a contributory factor. While that trend is undoubtedly still playing a part, there are other elements at work that the goverment would do well to acknowledge, and then rectify.
There can be no doubt that the ongoing uncertainty over the prospect - and timing - of a second referendum on Scottish independence is having a detrimental economic impact.
First Minister Nicola Sturgeon may have reason to be angered at Prime Minister Theresa May’s refusal to countenance another referendum, but there is a degree of brinkmanship at play when the nation’s finances are in such a fragile state.
The most prudent and responsible course of action would be to take pause and concentrate on stimulating an economy which, as Professor Roy points out, did not grow at all over the course of 2016.
In order to achieve that sustaintably, the government requires a programme which encourages businesses, lowers taxes, and reduces rates burdens.