Northern Powerhouse could be bigger economic threat than London

The second of these thoughts - that they might recognise the shortcomings of their policies - is probably a bit far-fetched. But the first notion might have some weight, given people tend to be influenced more by their immediate surroundings than the hard economic statistics or by reading about what is happening somewhere else.

Whatever the thinking of politicians, it seems inevitable, given the ever-growing dominance of big cities around the world and UK Government policy, that the disparity between the performance of London and south-east England and what is going on in the rest of the country will continue to widen.

Industry figures this week showed retail sales value in Scotland in May was down 3.1 per cent on the same month of 2014, in contrast to a year-on-year rise in the UK as a whole, with tough economic conditions and poor weather cited as crucial factors.

Scottish Retail Consortium head of policy David Martin said: "What you see is the impact of London and the south-east. It didn't obviously dip so much, and it has rebounded much more quickly than what we have seen in the rest of the UK. That has definitely had an impact on households' ability to spend and consumer confidence."

Other recent surveys have highlighted the economic challenges facing Scotland. Some, but far from all, of these challenges are connected with weakness in the oil and gas sector arising from the tumble in crude prices in the second half of last year.

A survey published this week by the Institute of Chartered Accountants in England and Wales shows that businesses in Scotland are, overall, the least confident in the UK, with growth in staffing north of the Border significantly weaker than elsewhere.

Post-independence referendum uncertainty, questions over the UK's continuing membership of the European Union, and oil and gas sector weakness were cited as factors.

A survey by recruitment specialist Manpower meanwhile shows Scotland has the weakest employment outlook of any nation or region in the UK for the coming quarter, with the oil and gas sector's troubles weighing heavily.

One of the last things the Scottish economy needs right now is further energy sector woes, given the troubles of the North Sea. But maybe this has escaped the notice of London-centric politicians?

Industry body Scottish Renewables warned the Conservative Government's early end of support for onshore wind farms, announced yesterday, could cost £3 billion of investment in Scotland.

Scottish Renewables chief executive Niall Stuart said the UK Government's decision to close the Renewables Obligation a year earlier than planned was "bad for jobs, bad for investment and can only hinder Scotland and the UK's efforts to meet binding climate-change targets". He added that the decision could put around two gigawatts of onshore wind projects in Scotland at risk, noting these could meet electricity demand equivalent to that of 1.23 million Scottish homes.

There is little doubt the UK Government's decision presents a further significant challenge not just to the energy sector but to the wider Scottish economy.

However, while not wishing to understate its impact, the energy sector turmoil will hopefully dissipate over time and Scotland can return to a more stable footing on this front in terms of both traditional and renewable energy.

The challenges to Scotland from other parts of the UK are, however, almost certain to escalate.

The dominance of London and south-east England is likely only to increase.

However, it looks more and more likely, on the basis of the current UK Government's policies, that an even-greater challenge to Scotland's economy could come from Mr Osborne's much-vaunted "Northern Powerhouse".

For the avoidance of doubt, this Northern Powerhouse does not include Scotland. Rather, Mr Osborne, in spite of his passion for the Union, uses "Northern'" to mean north of England.

Late last year, Mr Cameron gave his backing to a plan for a high-speed rail project to knit together cities such as Liverpool, Manchester, Leeds, and Sheffield, a so-called HS3.

Mr Osborne has hammered home his view that these cities, through heavy investment and the creation of high-speed transport links, could collectively become a Northern Powerhouse.

Glasgow Chamber of Commerce's chief executive has warned cities in Scotland must be vigilant about what their counterparts in England are gaining by way of devolution to avoid being disadvantaged. Stuart Patrick flagged Greater Manchester's success in winning decision-making powers, in areas including transport and health spending, and in securing resources. He also expressed concerns that Glasgow could eventually lose out on investment to Manchester given plans for the HS2 high-speed rail project.

He said: "I am envisaging an HS2 that finishes in Manchester and they [the city leaders] are out there saying to the American bank, 'Really our connections to London are so much better than Glasgow. You can't get HS2 up to Glasgow. I really think you want to put your bank here'."

We must not underplay Scotland's strengths as a place for companies to set up, in terms of a whole raft of factors from workforce skills to quality of life.

Scotland's very strong inward investment performance over the years is clear evidence of these strengths.

We probably need to accept the growing dominance of London and south-east England as a fact of life, while keeping a watchful eye on the degree to which policy-making at Westminster is widening the gap.

However, it is absolutely crucial Scottish politicians and business leaders watch those Northern Powerhouse plans develop and respond swiftly, to avoid the economy north of the Border paying a heavy price for the north of England's success.