State of the Economy
The Finance Secretary today called on the Chancellor to take action, through an immediate stimulus to capital investment, to address the UK double-dip recession and prevent Westminster’s economic policy from further hampering Scotland’s economic recovery.
Mr Swinney’s comments follow the quarterly State of the Economy report published today by the Scottish Government’s Chief Economist, Dr Gary Gillespie, which provides both an update on recent developments in the Scottish economy and on outlook of future growth prospects. Mr Swinney is attending the Global Investment Conference in London today, which is part of a programme of activity to capitalise on the global interest in the Olympics by showcasing Scottish industries and promoting inward investment to Scotland.
The report highlights that the strength of the recovery in Scotland will depend on a number of key factors including - developments in the Euro Area, the strength of recovery in key export markets such as the US and emerging economies, the ability of the private sector to adjust to the challenges of deleveraging and a pick-up in confidence amongst consumers and the business community.
Key findings of the report include:
- Like all other advanced economies, Scottish growth is forecast to remain fragile in 2012, then increase through 2013. Based on current forecast levels, Scottish output is likely to return to pre-recession levels some time in 2014.
- Most advanced economies – including Scotland and the UK – are going through a period of deleveraging which will make achieving robust growth particularly challenging. An expansion of private investment, strengthening exports, and a pick-up in business and consumer confidence, will be key to counterbalancing against this deleveraging
- Conditions in the construction sector are likely to remain challenging without a stimulus to demand. However, the underlying performance of other sectors – such as production and services which together make up 90 per cent of the Scottish economy – has been far healthier than the headline GDP figures suggest with further scope for expansion
- On the upside, if a resolution to the Euro Crisis can be found then this is likely to lead to a sharp upswing in confidence and help unlock the substantial surpluses of funds that have been built up in the corporate sector for new investment
Finance Secretary John Swinney said:
“This updated analysis sets out the challenges and opportunities that Scotland faces in strengthening future economic growth and prosperity. The economy in Scotland is demonstrating a greater resilience than the UK, but global growth is forecast to remain subdued for the rest of this year, with improvements occurring through 2013.
“This week’s GDP figures showed the UK double-dip recession has deepened with a further fall in output of 0.7 per cent and a 5.2 per cent fall in UK output in the construction sector. This analysis also highlights that the conditions in the construction sector are likely to continue to remain challenging without a pick-up in demand, which reinforces my view of the need for the UK Government to take immediate action to stop the sector’s slowdown through capital investment.
“This Government and our enterprise agencies are working tirelessly to strengthen the economy, with the powers we have, and our economic strategy is delivering results - Scotland has a higher employment rate than the UK and a stronger GDP performance than the UK over the past six months.
“We are doing all we can to stimulate growth, however, Scotland exists in an open economy and the strength of our recovery will be influenced by external events in key markets such as the euro area and the US.
“This report also states the importance of Scotland continuing to strengthen its presence in international markets, which is why we are working hard to increase exports by 50 per cent by 2017, and to showcase Scotland as a competitive and attractive location to work and do business.
“The latest Ernst & Young UK Attractiveness survey demonstrates our track record in securing international investment – for the second consecutive year Scotland was the top performing location in the UK for Foreign Direct Investment (FDI) with almost 6,000 jobs created in 2011.
“The global recovery is clearly fragile, but it’s important the UK Government does more to address its failure to stimulate growth through delivering the capital investment that is needed to boost the construction sector and lay the foundations for recovery.
“Last month we announced our plans for a £105 million package of economic stimulus, which will maximise opportunities to create jobs and growth. We need the Chancellor to take action - follow Scotland’s lead - and borrow an extra £5 billion to invest in capital projects which would guarantee Scotland’s £400 million plus share would be allocated in this financial year.
“This Government recognise that with the full economic and financial powers of independence we could maximise Scotland’s economic success and prosperity, in the meantime we need the UK Government to adopt a Plan B and perform another budget u-turn.”