STALLED SCOTLAND

Action needed as growth is lagging behind UK average Economic output falls, putting us at risk of recession Construction and manufacturing are hardest hit

SCOTLAND’S economy went into reverse at the end of last year, sparking fears of a return to recession, official figures revealed yesterday.

The value of goods and services produced across the economy shrank by 0.2 per cent in the final three months of 2016.

If the next Gross Domestic Product figures, for January to March this year, also show output shrinking, Scotland will be deemed to be back in recession.

Overall, the Scottish economy grew by 0.4 per cent across 2016 but the contrast with the rest of the country was a gloomy one.

The UK saw growth of 1.8 per cent last year, including an increase in economic output of 0.7 per cent in the last three months of 2016.

Experts warned immediate action is vital to stimulate growth and catch up with the stronger overall UK performance but politicians blamed constitutional uncertainty not of their making.

SNP Finance Secretary Derek Mackay pointed the finger at the UK Government and Brexit.

He said: “We have already seen significantly lower consumer confidence in Scotland since the vote last summer. Now we see that feeding into our growth figures.”

Tory peer Andrew Dunlop blamed the SNP’s plan for a second independence referendum, adding: “The simplest way to provide more certainty for people and businesses would be to take a second referendum off the table.”

However, analysts said problems go deeper than constitutional uncertainty.

Professor Graeme Roy, director of Strathclyde University’s Fraser of Allander Institute, said: “We previously warned that this was a fragile time for the Scottish economy and that a contraction in output towards the end of 2016 was entirely possible. Sadly, these fears have now been realised.

“At a time when the UK economy grew at 1.8 per cent over the same period, this is a serious cause for concern.

“With any Brexit uncertainty affecting the UK as well, it’s hard to argue that Scotland’s relatively weaker performance can be explained by the outcome of the EU referendum.”

Last year, GDP in construction fell by six per cent and declined in manufacturing by 7.3 per cent. All areas of manufacturing were affected, not just oil and gas.

The services sector, which includes tourism, saw no growth in the last three months of 2016.

The slowdown emerged as the Scottish Government officially take control of new tax powers from Westminster this week.

They include income tax, which Nicola Sturgeon says will raise more than £100million in extra cash for public services.

GMB Scottish secretary Gary Smith urged politicians to invest in services and focus on jobs and boosting the “ailing economy” instead of “pet projects”.

He added: “These figures must act as a wake-up call to our politicians before they sleepwalk back to recession.”