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

The Daily Telegraph - Business - - Business -

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

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