SCOTLAND has avoided recession, with new figures showing a return to economic growth.

Data released by Scotland’s Chief Statistician showed the Scottish economy grew by 0.8 per cent in the first three months of 2017.

It was a marked improvement on a 0.2 per cent fall in GDP in the previous quarter, and the highest quarterly growth figure since 2014, when falling oil prices began to hit the North Sea.

Two consecutive quarters of falling GDP would have constituted a technical recession.

The Scottish Chambers of Commerce said avoiding recession was “a huge sigh of relief for our economy” and pointed to the end of “a stagnant two years” for the economy.

Three-quarters of Scottish growth in Q1 was attributable to the production sector, which includes manufacturing, quarrying, water and energy supply, as well as the metal industry which is part of the North Sea oil and gas supply chain.

The Fraser of Allander Institute last week reported Scottish exports had been boosted by the weaker pound caused by the slide on Sterling since the Brexit vote.

The Scottish Q1 figure for 2017 was four times higher than that for the UK as a whole, which grew by  just 0.2 per cent.

However, year on year, the UK economy still out-performed Scotland’s, growing by 2 per cent in the 12 months to the end of march, against 0.7 per cent for the year in Scotland.

SNP economy secretary Keith Brown welcomed the latest figures and said they reinforced the message that the fundamentals of Scotland’s economy were strong.

He said: “Scotland’s output is now 6 per cent above the pre-recession level and unemployment is at its lowest ever level.

“Since late 2014 our growth rate has been impacted significantly by the fortunes of the North Sea with around two thirds of the slowdown in 2016 attributed to lower oil prices.

“Today’s figures show a rise in output in industries linked to the North Sea for the first time since 2014. While there is no room for complacency, these figures - alongside a number of recent business surveys - indicate that there is growing confidence in the sector.”

He said manufacturing was also up, in part due to the resumption of steel production at the Dalzell plant which was saved by an intervention by the Scottish Government.

He added: “We will continue to do everything possible to support the performance of Scotland’s economy, particularly as Brexit uncertainty continues to cast a shadow over the future economic outlook.

“Today’s figures are a welcome vote of confidence in our economy and the Scottish Government will continue to work hard to support it through difficult times ahead.”

The GDP figures showed a 3.1 per cent growth in production, services up 0.3 per cent, but also a further fall in the construction sector, down another 0.7 per cent.

Scottish Secretary David Mundell said: “These are very encouraging figures. The Scottish economy is returning to growth and I am pleased to see that the manufacturing sector in particular is making the most of export opportunities.

“But, over the year, Scotland has continued to lag behind the UK as a whole - so there is still a lot of work to do.

“The Scottish Government has extensive powers at their disposal to grow and support the economy and these figures underline the need for our two governments to work together as we prepare to leave the EU.

“Brexit will bring new opportunities. We need to ensure Scottish business can take full advantage.”

Labour economy spokesperson Jackie Baillie added: “It is a huge relief that Scotland has avoided recession, but this was a narrow escape for our fragile economy.

“The long-term trend paints a worrying picture of Scotland’s economic performance, with the average annual change of just 0.5 per cent – a quarter of the UK-wide growth.

“The rise in output from industries linked to the North Sea is very encouraging, but recent history should have taught the SNP the danger of relying solely on this sector.

“Far from a vote of confidence in the economy, as Economy Secretary Keith Brown has claimed, Scotland is not out the woods yet and SNP ministers need to redouble their efforts.

“They need to end their obsession with independence and focus on the day job of boosting jobs and productivity and supporting business.”

Scottish LibDem leader Willie Rennie added: “Scotland has had a brush with recession. The big picture is of an erratic and patchy economy.  

“One quarter down followed by one quarter up is clear evidence.

“The long term route out of this is significant investment in education and skills.”

Liz Cameron, Chief Executive of Scottish Chambers of Commerce, said: “The threat of a technical recession for the Scottish economy has been lifted.

“The level of growth recorded in the first quarter is ahead of expectations and significantly ahead of the overall UK figure. This is a huge sigh of relief for our economy.”

“The most significant contributor to recovery has been the production sector and this reflects the positive signals that we have been detecting from Scotland’s manufacturers over recent months and, indeed, the returning signs of confidence from the oil and gas supply chain.

“This represents the best quarter of growth for the Scottish economy since the effects of low oil prices began to emerge in 2015 and sparks hope for the future after a stagnant two years of anaemic economic performance.”