Economic troubles appear "a little less marked" north of the border and Scotland looks better placed to come through a slowdown than in past cycles.

Economic troubles appear "a little less marked" north of the border than in England, and Scotland looks better placed to come through a slowdown than in past cycles, the director-general of the Confederation of British Industry declared yesterday.

Richard Lambert gave his relatively reassuring assessment of Scotland's prospects in an interview with The Herald, in which he conceded UK-wide recession was "perfectly possible" but also expressed hopes that things would not be as bad as the early 1990s.

Lambert, a former member of the Bank of England's Monetary Policy Committee, believed there might be room for a cut in benchmark UK interest rates as early as November.

He was at pains to avoid becoming embroiled in Scottish political issues, in contrast to predecessor Digby Jones.

Lambert, echoing a point made by Gordon Brown at CBI Scotland's annual dinner in Glasgow on Thursday night, said: "The Scottish point, which the Prime Minister touched on last night, is employment levels in Scotland are much higher than they have been in past times of slowdown. The economy is more diversified than it was. From that perspective, it seems to me Scotland is better placed to come through a slowdown than it has been in past times."

On the International Labour Organisation measure, the working-age employment rate for Scotland of 76.4% is ahead of the UK-wide figure of 74.8%. Brown on Thursday contrasted this position with that in the 1980s.

Asked if he expected a shallower trough in Scotland than UK-wide in the ongoing economic slowdown, Lambert replied: "The impression I have had, talking to businesspeople over the last day is, although they are feeling the pinch like everybody else, it is perhaps a little less marked than it is in England.

"The construction sector is having a tough time here, as it is in England, but house prices are perhaps a little less soft here than they are in England. In past times like this you felt Scotland was first off the bat to have a hard time. It doesn't feel like that now."

Scotland's previous dependence on heavy industry saw it suffer badly, particularly in terms of unemployment, in past times of economic trouble.

Lambert also noted yesterday that Scotland, unlike the City, did not have a big exposure to an investment banking sector hit hard by the global credit crunch.

His relatively upbeat comments about the Scottish economy chime with Bank of Scotland's latest index of leading indicators, published this week.

This index points to output in Scotland increasing each quarter.

In contrast, the Organisation for Economic Co-operation and Development this week projected small dips in UK-wide economic output in each of the third and fourth quarters of this year.

Asked how much it mattered whether the technical definition of UK recession were met, Lambert replied: "I think it matters for headlines and politicians. In the real world, whether the economy grows by 0.1% or shrinks by 0.1% doesn't make a heck of a lot of difference. I think it is going to be touch and go either way. It is perfectly possible we could have two quarters where the economy shrinks a bit. It is going to be uncomfortable whatever you call it."

Although noting unemployment would tick up as spare capacity in the economy increased with "well-below-trend" growth, Lambert hoped the rise in joblessness might be less than in previous cycles.

He said: "I think businesses have been quite canny about not over-extending themselves in good times. I am hopeful that, as the economy slows, they won't feel the (same) necessity to lay off people...I am hopeful that, although unemployment will pick up somewhat, it won't be like in the early 90s."

Chancellor Alistair Darling was blamed this week for sending the pound tumbling by making downbeat comments about the UK economy.

Darling, in a newspaper interview published last Saturday, said conditions facing the UK economy "are arguably the worst they've been in 60 years".

Asked yesterday if Darling's comments had been helpful or unhelpful, Lambert quipped: "The lesson is, when you are on a croft (on your holiday) in the Outer Hebrides, don't invite a journalist who you (last) met 10 years ago for two days. If you had gone to his desk in the Treasury, (he) would not have said that."

Lambert, touching on Darling's "60 years" comment, added: "I don't think he is going to introduce rationing in the Pre-Budget Report."

Asked when he thought conditions facing the UK were last as bad, Lambert replied: "I think the financial (system) shock is very big indeed, if you compare it with previous episodes. I was actually around in the early 70s and that was pretty hairy. In some ways this is pretty hairy but it is a different kind of shock. In terms of the real economy, I have seen worse.

"Obviously, there are risks and things could go wrong but I don't think it is unreasonable to hope that, after another year of well below-trend growth, which is not comfortable, it is not a nice time, we could see interest rates coming down, domestic consumption ticking up a bit, net trade making a positive contribution to economic growth and things starting to pick themselves up (around the) beginning of 2010."

Lambert added: "If it did work out that way, it wouldn't be anything (like) as bad as the early 90s recession."

On when the MPC might cut base rates from 5%, he said: "I am coming round to the view that, personally, I think it should be sooner rather than later."

Referring to the Bank's next quarterly inflation report in November, he added: "Maybe that might be a good moment. I don't know." He believed Bank Governor Mervyn King would not, after writing letters this year explaining why inflation was so far above the 2% target, want to be penning correspondence in 2010 saying why it was significantly below target.

Asked if the change of administration at Holyrood last year, from Labour-Liberal Democrat to the SNP, had made Scotland a better or worse place to do business, or made no difference, Lambert replied: "I certainly have a sense that the business community here is, on the political front, relatively impressed with the way the events have unfolded over the last year."

However, diplomatically, he declined comment on SNP plans to replace council tax with a local income tax. CBI Scotland opposes these plans.

He would not comment on the issue of Scottish independence, saying he would have "everything to lose and nothing to gain" by discussing this matter.