THE recovery in the Scottish economy appears to be strengthening and becoming more embedded, a senior expert has claimed.

Donald MacRae, chief economist of Bank of Scotland parent Lloyds Banking Group north of the Border, gave this upbeat assessment in his latest update, published yesterday. He based it on a recent run of more positive economic data.

Mr MacRae highlighted the fact that Scottish gross domestic product has now risen for four consecutive quarters.

The most recent GDP figures, published by the Scottish Government in July, showed a 0.4% quarter-on-quarter rise in economic output north of the Border in the opening three months of this year.

Mr MacRae also noted that headline unemployment in Scotland, on the International Labour Organisation measure, was 1000 lower in the quarter to June than in the preceding three months. ILO unemployment stood at 198,000 in the quarter to June.

Mr MacRae also flagged a marked rise in consumer optimism in the second quarter. And he added that the latest Bank of Scotland Purchasing Managers' Index report signalled strong expansion in private sector activity north of the Border in July.

He declared: "These data suggest the recovery in the Scottish economy is strengthening and becoming more embedded."

Leading economist Jeremy Peat, director of The David Hume Institute think-tank in Edinburgh, appeared less upbeat about the situation.

Asked for his view on Mr MacRae's assessment that the recovery was strengthening and becoming more embedded, Mr Peat replied: "I think that we can hope that is the case, but the firm data that we have so far are showing that growth is based primarily on the consumer.

"We all know how difficult that is, when average earnings are declining in real terms."

Mr Peat added: "We still want firm evidence in terms of business investment, exports and the broader economy. We can hope, but we still don't know for certain."

Separately, a survey published yesterday by venture capital investor Albion Ventures showed small and medium-sized enterprises in Scotland were among the most confident in the UK SME sector about their ability to recruit skilled staff.

Overall, UK SMEs ranked difficulty in finding skilled workers as second in their list of the biggest challenges to growth, behind red tape and regulation.

Lack of access to finance was ranked third, with difficulty in accessing new markets rated fourth, and pace of technological change in fifth position.

The report found that nearly three in five UK SMEs were confident about expanding their businesses over the next two years.

Albion Ventures said this suggested small businesses would play a "crucial role" in driving the UK's recovery.

The survey of 450 SMEs showed that micro-businesses, those with between two and five employees, were more likely to believe that they would grow dramatically in the future, rather than at a steady pace.

The 16% of micro-businesses predicting dramatic growth compared with a 10% average for UK SMEs as a whole.

Patrick Reeve, managing partner at Albion Ventures, said: "While 60% of small businesses expect their business to grow over the next two years, few think it will be an easy journey.

"It's no surprise that regulation and red tape rank as their biggest bugbear but it was less expected to find such a high portion of small firms struggling to find the right people."