AFTER a run of grim statistics shaped by the oil price collapse, and fears Scotland may have edged into recession at the New Year, the latest GDP figures are welcome indeed. In the first three months of 2017, the Scottish economy not only grew, but grew well.
The 0.8 per cent rise was four times that managed by the UK over the same period, and the best Scottish quarter since the end of 2014, when the oil slump took hold. It meant Scotland avoided the technical recession, defined as six months of shrinking output, which had seemed unnervingly close when the economy dipped at the end of 2016.
Economy Secretary Keith Brown was able to bask in the data’s rosy glow. However it was his colleague Fergus Ewing who arguably deserved more of the credit. The former business minister was instrumental in securing Liberty House’s takeover of the mothballed Dalzell and Clydebridge steel plants in Lanarkshire last year.
The re-opening of Dalzell contributed to a 7 per cent rise in metals manufacturing in the quarter, which in turn fed into a 3.1 per cent growth in the production sector, its biggest leap since 2009.
Mr Brown was also able to highlight growth in industries linked to the oil and gas supply chain for the first time in two years, another optimistic sign.
The respected Fraser of Allander Institute, which also detects confidence returning to the oil and gas sector, said the GDP figures showed “a welcome degree of bounce-back” in activity.
So there are reasons to feel happier about the Scottish economy, tentatively as least. But there are also, at this stage, reasons for caution and restraint. Joy is not yet unconfined.
While the headline figures are welcome, the economy as a whole remains fragile. Over the long term, the Scottish economy continues to lag stubbornly behind that of the UK. In the year to March, the UK economy grew by 2 per cent, Scotland’s by 0.7 per cent.
As the Fraser of Allander highlighted last week, the North Sea’s problems and Brexit are only part of the picture, with Scotland’s economy “stuck in a cycle of weak growth, declining confidence and poor investment and net export figures”.
Some of the figures behind in the latest rise also track back to one-off causes. The petroleum refining at Grangemouth which helped drive manufacturing growth typically spikes in the first quarter of each year then drops away again, for example.
Services grew below trend at 0.3 per cent, while construction fell yet again, by 0.7 per cent.
And while exporters and tourism sector are buoyed by the weak pound following the Brexit vote, Sterling’s fall is also driving up inflation and putting a painful squeeze on household budgets.
As economist John McLaren writes in The Herald today, the GDP figures are rather like the Scottish summer in which they have arrived: there is welcome economic light, but dark clouds remain overhead.
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