SCOTTISH growth slowed sharply in the second quarter from a solid pace in the opening three months of this year, official figures have revealed, prompting experts to highlight economic challenges including Brexit uncertainty.
Strathclyde University’s Fraser of Allander Institute highlighted its view the second-quarter growth data would increase the likelihood of the Scottish Fiscal Commission being “relatively cautious” in formulating tax revenue estimates for the Holyrood Budget.
Figures published yesterday by the Scottish Government show gross domestic product (GDP) north of the Border grew by 0.1 per cent quarter-on-quarter in the three months to June. This was adrift of well-below-trend expansion of 0.3 per cent in the UK as a whole during the second quarter.
The Scottish services sector expanded by 0.7 per cent during the three months to June but manufacturing output fell by 0.7 per cent after a sharp jump in the first quarter, and construction activity tumbled 3.5 per cent.
The official estimate of Scottish growth in the first quarter was revised down yesterday from 0.7 per cent to 0.6 per cent but this remained well ahead of corresponding UK-wide growth. National accounts data published last week showed UK GDP grew by 0.3 per cent in the first quarter.
Graeme Roy, director of the Fraser of Allander Institute, said of the latest Scottish GDP figures: “On the one hand, continued growth is clearly welcome, and on the back of the strong growth in Q1 2017, we always said that holding on to some of these gains would be a success in its own right. But, in five of the last six quarters, Scottish growth has been just 0.1 per cent or lower.”
The Scottish economy stagnated in the opening three months of 2016 and grew by 0.1 per cent in each of the following two quarters. It then contracted by 0.2 per cent in the fourth quarter of 2016, before rebounding strongly in the opening three months of this year.
The Scottish business services and finance sub-sector grew by 0.9 per cent in the second quarter.
Comparing the year to June with the prior 12 months, the Scottish economy grew by only 0.4 per cent. Over the same period, the UK as a whole grew 1.7 per cent, well below its long-term average.
John McLaren, who is honorary professor at the University of Glasgow’s Adam Smith Business School and runs the Scottish Trends website, said: “The performance in the first half of 2017 does little to make up for the complete lack of growth seen in the Scottish economy through 2016, compared with merely ‘poor’ growth seen for the UK.”
He added: “The onshore impact of falling activity in the North Sea will no doubt be a major factor in explaining Scotland’s poor 2016 performance and its negative impact is likely to have weakened during 2017.”
Hugh Aitken, director of the Confederation of British Industry in Scotland, said: “The Scottish economy faces a number of clear and immediate challenges, with a slowing UK economy compounded by continued low oil prices and Brexit-related uncertainty.”
Mr Roy said: “These [GDP] figures come just as the Scottish Fiscal Commission will be starting to prepare their forecasts for Scottish tax revenues in advance of December’s Budget. [The] figures only serve to increase the likelihood that they will be relatively cautious in how much revenue they think the Scottish economy will raise for the budget in the coming years.”
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