06 Jun 2017
Last week the BBC’s flagship Today programme was in Scotland as part of its General Election tour of the UK and I was asked to join in with a contribution from Glasgow Chamber.
I can’t deny that early morning is not usually my best time but if you are asked to do a 6.15 am slot on the Today programme you don’t say no.
The topic was Scotland’s economic condition, and in particular the possibility that Scotland could actually be in recession given the Scottish Government’s announcement in April that the economy had contracted by 0.2% in the last quarter of 2016.
The growth rate for 2016 as a whole was just 0.4% whilst the UK grew at around 1.8%, so Scotland has been underperforming. The main reason is pretty obvious; the impact of a lower oil price on the North Sea oil and gas business.
As the Fraser of Allander pointed out in its March economic commentary, oil and gas output has fallen substantially as a proportion of Scottish GDP, so there had to be some consequences and that has shown up in the loss of jobs in the North East. UK Oil and Gas are estimating this to be around 120,000. There is also some clear evidence that consumer confidence is lower in Scotland than in the rest of the UK following the Brexit vote.
Against that there are some indicators that look more positive. Scottish Engineering’s latest quarterly review reported healthy growth in export orders with a net 30% of businesses reporting above normal activity. And the Scotch Whisky Association announced whisky exports back into growth again in 2016.
Admittedly these trends follow a few years of decline, and obviously we would expect to see some export growth given the depreciation of the pound.
But there are at least two more statistics that suggest the picture is not all gloomy. In April Glasgow Airport notched up 50 months of consecutive growth in its passenger throughput, taking the airport’s figures well on the way to 10 million. Unemployment is also much lower than might have been expected for a recession.
But there is one trend that captured my attention in the Fraser commentary. At the UK level since the Brexit vote, business investment has fallen sharply. It’s a cliché that business doesn’t like uncertainty and once again I was asked what the member view was on the Brexit vote and on the possibility of a second independence referendum.
We did debate the results from the EY inward investment review for 2016 that show Scotland holding on as the most popular location for inward investment after London, although the fastest growing region was Manchester and the North West.
But the projects are smaller with fewer jobs involved. Inward investment is also a small component of total business investment and so it is worrying if the total figure is in decline.
Needless to say after the General Election is past the Chamber will be concentrating on championing measures which encourage business investment.
