Scottish economy falls behind UK despite marginal growth

Scotland's economy is still continuing to fall behind the rest of the UK despite an increase in GDP north of the border, official figures today show.

Wednesday, 12th October 2016, 12:37 pm
Updated Tuesday, 25th October 2016, 8:35 pm
The Scottish economy grew by 0.4 per cent in the second quarter of the year.. Picture: Danny Lawson/PA Wire

There was a 0.4% increase in the Scottish economy in the second quarter of this year - but this compares with a 0.7% increase UK-wide.

And UK growth hit 2.2% over the year to July, compared with just 0.7% in Scotland.

Liz Cameron, Chief Executive of Scottish Chambers of Commerce, welcomed the fact that Scotland's economy is still expanding.

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Keith Brown says the Scottish Government is acting to support business.

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But she said: "There is still a great deal of work to be done. To put this in perspective, the Scottish economy has grown in a year at almost the same rate that the UK economy has grown in just three months.

“These figures underline the fact that Scotland’s economic performance has been significantly lower than that of the UK as a whole for a full year and, whilst we are now seeing welcome growth in our production and service sectors, construction has been contracting at a significant rate for two consecutive quarters."

The underperformance of the service sector is the main reason Scotland is falling behind. This dominant sector has grown at just above half the rate seen in the UK over the last two years and Transport And Communications have seen next to no growth compared to the 10% growth at the UK level.

Keith Brown says the Scottish Government is acting to support business.

Senior economist Professor John McLaren of Scottish Trends said the second quarter of 2016 has actually beenbetter than expected, as the impact of the closure of Longannet power station was being felt.

But he said slow growth in Services has been "holding back the rate of Scottish economic growth" for some time.

He warned: "If similar poor growth figures, especially in the Services sector, were being seen at the UK level it seems highly likely that the Bank of England and the UK Government would be more pro-active in terms of amending monetary and fiscal policy."

Economy Secretary Keith Brown insisted measures are being taken to support business in the wake of the EU vote, including a £500 million Scottish Growth Fund, and repeated calls for the UK Government to bring forward a capital stimulus package similar to a £100 million commitment in Scotland.

"These figures show that prior to the vote to leave the EU, Scotland's economy was growing," he said.

"Despite concerns surrounding the EU referendum, the fundamentals of Scotland's economy are strong and recent successes, such as Scotland securing more foreign development investment projects in 2015 than any other part of the UK outside London, are to be welcomed."