Scotland’s slow economic recovery creates a headache for nationalists
Despite less of a hit, return to health has been harder to come by north of the border, finds Tim Wallace
Scotland’s economy is struggling to climb back out of recession, making slower progress in its recovery than the UK as a whole, despite suffering a smaller drop at the height of lockdown.
GDP grew by 5.7pc in June, falling short of the 8.7pc surge recorded nationally.
It came after the economy shrank by 5.8pc in March and 19.2pc in April – both extremely large drops, but less severe than the UK-wide collapse. But despite this better starting position, growth has been slower since April.
As a result, the Scottish economy was still 17.6pc smaller in June than it was in February, meaning it has effectively been overtaken by the rest of the country. The British economy overall is now 17.2pc smaller than it was before the pandemic struck.
It raises serious questions over the potential for a newly independent Scotland to pay its own way should voters change their minds in any future referendum, cancelling the vote held in 2014.
A smaller economy with a weaker growth rate risks being less able to sustain a significant national debt or to borrow heavily when required by any future crises. Combined with turmoil in the oil markets – prices veered from more than $60 per barrel at the start of the year to a low of $26 – and Edinburgh’s finances look potentially shaky.
Almost every industry has made a weaker recovery north of the border. The dominant services industry has come back more quickly in the UK overall, as have the construction, production and agricultural sectors. Only in manufacturing have Scottish businesses made a stronger recovery, with output down by about 13pc on its pre-Covid level, compared with 14pc for the wider nation.
This chimes with NatWest’s regional surveys of businesses, which found Scotland was the only part of the UK in which business activity shrank in July, with Northern Ireland, Wales and every part of England growing instead. Demand for goods and services rose everywhere except Scotland and Wales, though companies remain optimistic for future growth.
At the same time the Joseph Rowntree Foundation warned its analysis found that Scotland is struggling to generate new jobs and is one of the regions suffering with the highest share of unemployed workers per job vacancy. As a result prospects are relatively bleak for a quicker upturn.
Local lockdowns have hit both sides of the border, including Aberdeen and Manchester. It makes for a rocky backdrop to the latest arguments over independence for Scotland.
The Government in Westminster has highlighted its largesse in spending heavily on UK-wide support programmes including the furlough scheme, which paid more than nine million workers to stay at home in an effort to cut redundancies, and stimulus packages including the “eat out to help out” scheme for discount meals.
Combined with the Treasury’s extremely low borrowing costs and the support on offer from the Bank of England, it argues that the crisis has shown the value of the union in financial terms for Scotland, as well as the other regions of the UK.
However, it has also clashed with the Holyrood administration of Nicola Sturgeon, the first minister, over the specifics of the lockdown measures and timetables, with the turbulent nature of the global emergency allowing for fierce arguments over the precise degree of incompetence seen in both centres of power.
The result has been a shift in polls in recent months. YouGov recently recorded its biggest majority in favour of leaving the UK, at 53pc to 47pc.
Nicola Sturgeon, Scotland’s first minister, has clashed with the Government over lockdown timetables