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Experts: 'Bounce-back from recession will take longer than after the Great Depression'

SCOTLAND'S economic recovery will take years to filter down to households, with the bounce-back from recession taking longer than after the Great Depression of the 1930s, experts have said.

From top, the Storehouse food bank, Anniesland, Glasgow; Denis Curran of Loaves and Fishes said things are getting worse for families; economist John McLaren said growth is still very slowTop photograph: Stewart Attwood
From top, the Storehouse food bank, Anniesland, Glasgow; Denis Curran of Loaves and Fishes said things are getting worse for families; economist John McLaren said growth is still very slowTop photograph: Stewart Attwood

The warning comes in the wake of the publication of several sets of statistics last week which show that not everybody is benefiting as the country slowly emerges from its economic gloom.

Spending power has been boosted as weekly wages in the UK finally catch up with inflation - but there has been a fivefold increase in the number of families north of the Border turning to food banks.

And while employment is up in Scotland, rising numbers of Scots are relying on credit cards or payday loans to cover mortgage or rent payments,

David Bell, professor of economics at the University of Stirling, said both Scotland and the wider UK were now performing relatively well after a long period of stagnation.

But he added the usual "bounce-back" effect - where a recession is followed by above-average growth -had now been delayed for years.

He said: "We may some time in the reasonably near future catch up to the level of output we had in 2007. But it is the longest period recorded where output has not got back to its pre-­recession level.

"Certainly the recovery was much quicker after the Great Depression than it is now."

Bell predicted it will take years for the recovery to filter down to households.

He added: "A lot of people who are defined as poor are actually in work because their wages are so low and have been falling in real terms.

"There is the start of the recovery where wages are now going up faster than prices - but for four or five years it has been the other way round, so people have been finding it more and more difficult to meet their bills. Of course, that then gets reflected in uptake at food banks and so on."

Figures published last week by the Office for National Statistics (ONS) showed unemployment rose by 3000 in Scotland between December 2013 and February 2014, to a total of 179,000. However, employment also rose by 16,000 over the same period.

The unemployment rate north of the Border is now 6.5%, below the UK average of 6.9%.

Other figures showed the Scottish economy grew at a slower rate than the UK in the last three months of 2013, with growth of 0.2% against 0.7% in the UK as a whole.

A shutdown at Grangemouth oil refinery in October last year following an industrial dispute is said to have accounted for a fall of 0.2%.

Comparing annual figures of 2013 to the previous year, Scotland's economy grew by 1.6% against 1.8% in the UK - still well below the long-term average annual growth rate of 2.3%.

But a report from the Scottish Chambers of Commerce last week said that economic growth investment, activity and business optimism had now returned to 2007 pre-recession levels.

Economist John McLaren, of Glasgow University's Centre for Public Policy for Regions, said the long-term picture in Scotland was similar to that of the UK as a whole: one of slow growth.

He said: "Although figures are better, they are still not as good as they should be at this stage and they are still below the long-term average growth rate.

"The recession was enormous in comparison to any previous recessions - much bigger than in the 70s, 80s or 90s. So in a sense it's been difficult to recover from that much of a hit."

However, McLaren said another difficulty was making a change in policies which had been put in place to stop a deeper recession in happening, such as injecting more money into the economy through quantitative easing.

"You never quite know what is going to happen if you stop quantitative easing … would activity dip again, or would it continue to improve?

"Few governments are willing to take the risk, as if you went into another recession it wouldn't improve your electoral chances. But then the problem is when do you make those changes … as you could end up in a low growth scenario for a long time."

Retail figures published last week suggest that consumer confidence is struggling to lift. The number of people hitting the shops in March fell by 2.1% compared with the same period last year, according to the Scottish Retail Consortium. However, this was up on the 4.1% decline recorded in February.

David Martin, head of policy at the Scottish Retail Consortium, said there had been improvement in recent months but added it was "tentative and not guaranteed".

He said: "What we are seeing is any form of economic recovery hasn't quite fed through to household budgets.

"There is a bit of a trade-off between food and non-food sales - if there is a lot of spending on one, there is a lot less spending on the other. So basically people are making trade-offs, which suggest that budgets are tight."

Martin said high-end retailers such as Waitrose and M&S Food, and discount stores such as Aldi and Lidl, had enjoyed the biggest growth.

He said: "Those retailers in the middle spot are struggling that little bit, so that sign of diversification of spend is suggestive that things are not quite back to where they were.

"Since 2008, people have become very comfortable with value and value products and are making trips to the discount retailers for bulk buys and cleaning products, for example.

"Where they do feel more confident, where they can spend a little more money, that is when they are splashing out and going to places like M&S."

However, the statistics also showed that there are many Scots who simply cannot afford to eat and are struggling to pay essential bills.

Last week, Christian charity The Trussell Trust said 71,428 Scots had used its food banks over the last year, against 14,318 in 2012-13.

Separate research from Debt Advisory Centre Scotland found 5.5% of Scottish residents used some form of credit to pay housing cost in February, compared to 3% in August last year.

Keith Dryburgh, policy manager for Citizens Advice Scotland, said one issue for many was a lack of stable, secure work that pays enough to survive on.

He said: "People in Scotland are still struggling with the effects of the recession in spite of the upturn in the economy.

"Citizens Advice bureaux regularly see people struggling with zero-hour contracts and in need of help to do such basic things as put food on the table.

"It's clear that the improving economic picture isn't being felt by everybody."

Like many others, Denis Curran, chair of Loaves and Fishes, a charity based in East Kilbride which provides food parcels, believes the impact of the UK Government's welfare reforms has been a major factor in driving the poor and vulnerable to food banks - a claim which the UK Government has repeatedly denied.

Curran said: "The idea of the economic recovery depends which side of the fence you are on. I have been with the charity for 21-and-a-half years and things are worse now.

"They [the UK Government] don't know what it is to stand there and watch women breaking their heart because they can't feed their kids.

"Let's be honest about it, people are struggling in 2014."

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