Brexit crisis Scottish economy
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Scotland returns to growth despite impact of Brexit woe

THE Scottish economy returned to growth in the third quarter, matching UK-wide expansion of 0.3 per cent, official figures show.

Business services and finance was a key driver of growth during the three months to September, according to the data published yesterday by the Scottish Government, but manufacturing contracted by 0.2% and construction output was flat.

The Scottish economy had contracted by 0.2% in the second quarter, matching the UK-wide performance in that period, having expanded by 0.5% during the opening three months of this year.

Comparing the year to September with the preceding 12 months, Scottish gross domestic product grew only 1%.

The dampening impact of Brexit-related uncertainty on economic growth in Scotland and the rest of the UK has been highlighted in a raft of surveys, and by economists.

CBI Scotland director Tracy Black said: “While it’s good to see that Scottish GDP growth recovered following a contraction in the second quarter, underlying momentum remains weak.”

Andrew McRae, the Federation of Small Businesses’ Scotland policy chair, highlighted the resilience of consumers and firms amid weak confidence, cost increases and political turmoil.

He said: “It’d be easy to dismiss these uninspiring growth figures, but they show that many people and firms have been getting on with business despite shaky confidence, rising overheads and political upheaval.”

In spite of manufacturing weakness, the broader Scottish production sector achieved a 0.9% quarter-on-quarter rise in output in the three months to September on the back of a 5.9% jump in electricity and gas supply. The services sector in Scotland grew by 0.2% quarter-on-quarter in the three months to September.

Comparing the third quarter with the same period of 2018, Scottish GDP was up 0.7%. This was adrift of a corresponding rise of 1% for the UK as a whole.

Scottish manufacturing output in the third quarter was down by 0.8% on the same period of last year. UK manufacturing output was flat quarter-on-quarter in the three months to September. However, third-quarter UK manufacturing output was down by 1.4% on the same period of last year.

Mr McRae called for politicians at Holyrood and Westminster to pay heed to the needs of smaller businesses.

He said: ”If in 2020 we want smaller firms to drive stronger local growth, MPs and MSPs must find time to think about their needs. Across the UK, we must see a new drive to end the late-payment crisis. And at Holyrood, we must see MSPs dismiss a half-baked effort to hand councils sweeping new tax powers.”

The FSB noted yesterday that earlier this year at the Scottish Parliament’s local government committee, opposition MSPs had united to force through a stage-two amendment to the Non-Domestic Rates (Scotland) Bill that it observed “could see councils take full control of the Scottish rates system and may end Scotland-wide small business rate relief”.

Scottish Finance Secretary Derek Mackay said: “While it is good news the economy has grown in the last quarter, it is unsurprising the overall pace of growth has slowed as a result of the continued uncertainty around Brexit.”

Sterling has come under pressure this week, with Prime Minister Boris Johnson spooking markets with proposed legislation to prevent extension of the Brexit transition period beyond the end of next year.

The pound was, at 5pm in London yesterday, trading around $1.3076, down nearly 0.4 cents on its previous close. It had tumbled by more than two cents on Tuesday, and is now below levels at which it was trading last Thursday as voters went to the polls.

Sterling had spiked above $1.35 in the wake of an exit poll published immediately after the polls closed at 10pm, which showed a clear Conservative majority.

Mr Mackay said: “Brexit remains the biggest threat to our economy. Just this week the Prime Minister has put the risk of a ‘no-deal’ Brexit back on the table by ruling out any extension to the transition period. This would be catastrophic for Scotland’s economy. Scotland did not vote for Brexit and the people of Scotland have the right to determine their own future free from Brexit as an independent member of the European Union.”

By Ian McConnell

Source: Herald Scotland

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Scottish economy subdued ‘until the fog of Brexit has lifted’

The SCOTTISH economy will remain subdued “until the fog of Brexit has lifted”, the country’s chief economist has warned.

In his latest State of the Economy report, Gary Gillespie reported business confidence was “subdued”, while households’ expectations for the economy have dropped to their lowest level since 2013.

Whether or not the new prime minister can get the Withdrawal Agreement through the House of Commons head of the October 31 Brexit deadline is “central to the outlook for Scotland’s economy over the next 12 to 24 months”, he added.

The Scottish Government’s chief economic adviser said if that does not happen and the UK is unable to secure a further extension to its membership of the European Union the country risks being pushed into recession, with a “corresponding sharp rise in unemployment”.

While the report noted GDP growth north of the border had strengthened to 0.5% in the first three months of 2019, and the employment rate had risen to a record 75.9%, the chief economist said: “Until the fog of Brexit is lifted, growth in the Scottish and UK economies will remain subdued and potentially more exposed to any downturns in international demand and growth.”

The rise in GDP in the first three months of 2019 was “driven in part by temporary factors”, such as pre-Brexit stockpiling and firms completing orders ahead of the original EU exit date of March 29.

Uncertainty caused by the Brexit process has “impacted business investment, with companies pausing key investment programmes”, the report added.

The chief economist also noted business investment has fallen in both Scotland and the UK “for a number of quarters”, saying that since the 2016 referendum “investment has lagged well behind the growth observed in other G7 countries”.

With the number of foreign direct investment projects in Scotland falling by 19% in 2018, he warned “these trends pose a significant risk for future output growth and productivity if they persist”.

The report stressed: “The short-term outlook for the economy continues to be dominated by Brexit uncertainty and the form any exit takes.”

As well as “subdued business confidence”, consumer confidence in Scotland has “continued to weaken over the past year”.

The report noted: “Consumer sentiment has been negative in Scotland since the EU referendum in 2016 and notably weakened in 2018 and into the start of 2019.

“The latest data for Q1 2019 showed a fourth consecutive quarterly fall in consumer sentiment and the indicator now stands at -9.6, its lowest level since the series began in 2013.

“Looking more broadly at households expectations for the next 12 months, sentiment relating to the performance of the Scottish economy and household finances have both fallen to their lowest levels since the series began in 2013 and have weakened for the past four consecutive quarters.”

Finance Secretary Derek Mackay said while the Scottish economy “continues to perform well”, its stability was “seriously threatened by the UK Government’s EU exit plans which, in whatever form they take, will damage the Scottish economy”.

He said: “As this report highlights, business investment has fallen in Scotland since the EU referendum and investment has lagged well behind the growth of other G7 countries.

“The Scottish Government has been clear and consistent that the best option for the future well-being and prosperity of Scotland is to stay in the European Union, otherwise we will see damage to our economy and the future prospects of the people of Scotland suffering.

“The Scottish Government will continue to do all we can to provide as much reassurance as possible as we face the potential of yet further uncertainty over the UK’s EU exit.”

Source: The National