Scottish economy lagging behind the rest of the UK

Economy - Image credit: PA images

Scotland’s economy is lagging behind the rest of the UK, new figures have shown.

Figures published by the Scottish Government reveal that GDP in Scotland grew by 0.4 per cent between April and June 2016, after remaining flat in the first three months of the year.

However, the equivalent growth across the UK as a whole in the same period was 0.7 per cent.

On an annual basis, compared to the second quarter of 2015, Scottish GDP grew by 0.7 per cent.

The statistics show in the second quarter of 2016, services grew by 0.5 per cent, production grew by 0.3 per cent, but construction contracted by 1.9 per cent.

Business services and finance contributed most to growth, accounting for 0.4 percentage points of growth, while electricity and gas saw the greatest contraction, by 0.2 percentage points in quarter two of this year.

Commenting on the figures, Cabinet Secretary for the Economy, Jobs and Fair Work Keith Brown said: “It is encouraging to see modest growth since the start of the year, which is the highest rate of quarterly growth since the start of 2015.

“These figures show that prior to the vote to leave the EU Scotland’s economy was growing.

“Despite concerns surrounding the EU referendum, the fundamentals of Scotland’s economy are strong and recent successes, such as Scotland securing more foreign development investment projects in 2015 than any other part of the UK outside London, are to be welcomed.”

However, business leaders were more cautious and stressed that more needs to be done for Scotland’s economy to keep pace with the rest of the UK.

Colin Borland, the FSB’s head of external affairs in Scotland, said: “These pre-referendum statistics might feel like a history lesson, but they teach us that Scottish growth was weak even before June’s historic vote.

“Scotland needs to strive for growth levels at least as good as the UK average. We look forward to the SNP talking business when they meet in Glasgow this week.”

Professor Graeme Roy, director of the University of Strathclyde’s Fraser of Allander Institute, commented: “On the one hand, this return to growth is a positive development, with production growing for the first time since early 2015 and services continuing to rise.

“However, Scotland continues to lag behind the UK. Over the last year, Scotland’s economy grew by just 0.7 per cent compared to UK growth of over 2 per cent.

“From April, Scotland’s budget will increasingly depend upon our relative economic performance vis-à-vis the rest of the UK so closing that gap must be a key priority.”

The chief executive of Scottish Chambers of Commerce, Liz Cameron, noted that although the increase in the growth rate in the second quarter was “good news”, she added that “there is still a great deal of work to be done”. 

“To put this in perspective, the Scottish economy has grown in a year at almost the same rate that the UK economy has grown in just three months,” she said.

“These figures underline the fact that Scotland’s economic performance has been significantly lower than that of the UK as a whole for a full year and, whilst we are now seeing welcome growth in our production and service sectors, construction has been contracting at a significant rate for two consecutive quarters.”

Cameron questioned Scottish Government policies such as the scaling down of business rates reliefs on empty properties, which she said are discouraging speculative development, and reducing the opportunities available for construction businesses. 

“This policy must be revisited and both the Scottish and UK Governments must continue to prioritise investment in our infrastructure to deliver an immediate boost to construction and a long term boost to our economy,” she said.