IF you were a First Minister seeking a re-run of the independence referendum, and thus hoping for a solid run of positive Gross Domestic Product figures to bolster your pro-independence arguments, you would not have taken huge amounts of encouragement from yesterday’s official data.
Scottish economic output fell by 0.2 per cent in the final quarter of 2016, after enjoying growth of 0.1 per cent in the previous quarter. Equivalent fourth-quarter growth in the UK was 0.7 per cent. The fourth quarter witnessed no growth or contraction in output by the services industry. Production fell by 0.9 per cent and construction by 0.8 per cent.
Overall economic output in the fourth quarter showed no change on the same quarter in 2015. By contrast, the equivalent growth in the UK was 1.9 per cent. Over the calendar year, Scotland’s GDP grew by 0.4 per cent on 2015, while equivalent growth in the UK was 1.8 per cent.
If this GDP trend is echoed in this year’s first quarter, Scotland will be judged to have re-entered recession, some nine years on from the global financial crash. Should that happen, the attention currently being paid to one “r” word – referendum – might focus on another, much darker one: recession.
Furthermore, as Jeremy Peat, visiting professor at the University of Strathclyde’s International Public Policy Institute, was quick to point out, growth rates north of the Border will affect income tax revenues raised in Scotland. Now is simply the wrong time, he added, for growth in Scotland to be “significantly underperforming” growth in the UK as a whole.
The North Sea downturn has not helped, of course. The same can be said of the lack of large-budget infrastructure projects. Even so, the difference between the decline in output in Scotland in the fourth quarter, and corresponding 0.7 per cent growth in the UK as a whole, is much larger than might have been expected. Fingers of blame have been pointed at Brexit-fuelled uncertainty but the continuing impact of welfare cuts might be another contributory factor, not least because of their impact on consumer spending.
The room for manoeuvre looks limited. Economists do not expect business investment to pick up, what with uncertainty caused by Brexit and a possible re-staging of the independence referendum. Consumers already fear a squeeze, given the prospect of low pay settlements in the face of surging inflation. And with multiple strains confronting public finances, big rises in government spending cannot be confidently forecast for this year.
The state of the economy, of course, counted for much when we cast our referendum ballots in 2014, though much less so when Britain pondered whether to leave the EU last summer. It is safe to assume that the economy will be a major factor at a second independence referendum. The SNP might argue that if it had full control of economic levers in an independent Scotland, GDP figures would be a lot rosier than at present. But this is a somewhat academic point at the moment. For the time being we can only hope that the first-quarter figures offer some glimmers of improvement.
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