Warning: Oil and gas sector downturn spreading to wider Scottish economy

Economist Jeremy Peat warned that the picture would have been even weaker without the boost to economic output arising from major public sector rail and road projects, including the Forth Replacement Crossing.

And economist John McLaren said: “Despite the stellar

performance in construction over the past two years, overall growth in the Scottish economy, four per cent, has been less than half that seen for the UK, 8.8 per cent, since the previous peak of 2007.”

Publishing its survey of fourth-quarter activity, Scottish Chambers highlighted evidence that the oil and gas sector downturn was hitting the broader services sector north of the Border.

Scottish Chambers measures the performance of significant numbers of oil and gas industry companies within the business and financial services category.

Garry Clark, head of Scottish Chambers’ economic development intelligence unit, said: “Where we were seeing big positive numbers when we were taking oil and gas out of the equation, you are now seeing level or even down in some areas.”

He added: “There is more evidence the impact of low oil prices on the oil and gas sector is beginning to seep through to the wider economy and have a negative effect there.”

The Scottish Government figures showed that manufacturing output north of the Border tumbled by 1.3 per cent quarter-on-quarter in the three months to September. And the Scottish services sector grew by only 0.3 per cent in the third quarter.

Mr Peat, visiting professor at the University of Strathclyde’s International Public Policy Institute, said of the third-quarter figures: “They really are disappointing, but not wholly surprising.”

He signalled his belief that the oil and gas sector downturn was likely to have been a major factor in the weak third-quarter GDP figures, but noted that it was difficult to tell from the data.

Mr Peat, noting that the services sector weakness was “quite difficult to pore through”, said: “I would suspect the oil and gas sector is a good deal to do with it but you can’t see it.”

The Scottish Government figures showed the construction sector north of the Border grew by 0.9 per cent quarter-on-quarter in the three months to September. And Scottish construction output in the third quarter was up by 17.3 per cent on the same period of 2014.

Mr Peat said of the GDP figures: “What we can see is that a lot of the upside is down to public construction sector projects. If you take that away, you get a much weaker story than the 0.1 per cent growth.”

He expressed concern about the impact on growth when major projects such as the Forth Replacement Crossing came to an end.

Scottish Chambers’ survey painted a stronger picture of the manufacturing sector north of the Border than the official GDP data. The survey showed rising sales and orders for the Scottish manufacturing sector in the fourth quarter.

Mr Clark said: “You read the survey alongside the other (figures). I think what it tells you is there are still some manufacturing companies that are still doing quite well given the circumstances at the moment. Obviously, there are other ones that aren’t.”

He highlighted a view that the Scottish Government growth figures for the final quarter of 2015, which will be published in the spring, would also be weak, given the findings of his organisation’s latest survey.

Scottish Chambers’ survey shows a sharp decline in sales revenue in the financial and business services, and retail and wholesale sectors. It signals a flat sales revenue position in tourism.

However, the survey shows strong growth in sales revenue in the Scottish construction sector.