Political uncertainty piles on pain for Scots economy

● Opposition leaders push Sturgeon to kick-start government business strategy

Scotland’s flat-lining economy is today facing more bleak news after experts downgraded growth prospects for the whole of the UK amid political uncertainty following the general election and the prolonged Brexit negotiations.

The news comes ahead of publication of official figures on Wednesday which will reveal whether Scotland is now in recession after growth shrank in the final quarter of last year.

Forecasts by the Centre for Economics and Business Research (CEBR) today indicate that UK economic growth will sink to its lowest levels since the financial crash in 2008. Nina Skero, the CEBR’S head of macroeconomics, said: “Our data on confidence show that the newlycreated political uncertainty is highly likely to weigh on growth in the short term. This means that we now do not expect an interest rate rise until the end of 2018.

“But we now think that a deal with the EU on Brexit is more likely than previously seemed, which will benefit both the UK and the remaining members of the EU. We have therefore revised up our forecasts for growth for the period from 2019 onwards.”

Scotland’s economy is lagging

market, would be enormously damaging to businesses.

“That is why we are fully committed to fighting to retaining our place in the single market and working hard to mitigate the damage from EU withdrawal.

“That job will be easier with a place for Scotland and the other devolved governments at the negotiating table – something there is growing support for, including from business leaders.”

Consumers have seen their spending power come under increasing pressure from soaring inflation triggered by the collapse of the pound following Britain’s vote to leave the European Union last summer, which has in turn affected high street sales.

Last week, data from analysts Gfk showed that consumer confidence has collapsed to post-brexit vote lows.

Against this background, the CEBR believes that the Bank of England will not raise interest rates until the end of 2018, rather than earlier in the year as previously forecast.

However, CEBR experts believe a deal with the EU “will emerge in the coming years” and that confidence will rebound, leading to stronger growth after 2018.

GDP is forecast to expand by 1.6 per cent in 2019 and 1.9 per cent in 2020, up from pre-election forecasts of 1.5 per cent and 1.8 per cent.

The latest Scottish GDP figures on Wednesday covering the first quarter of 2017 will confirm whether or not the Scottish economy has formally re-entered recession. It comes after the economy shrank in the final three months of 2016. A recession is defined as two successive quarters of negative growth.

Scottish Conservative economy spokesman Dean Lockhart said yesterday that Holyrood ministers must do more to kick-start Scotland’s struggling economy.

He said: “To grow the economy, if you look at successful economies worldwide – Singapore, Germany Switzerland – it takes a whole of government approach.

“We have a government here in Scotland that has its priorities elsewhere. The First Minister Nicola Sturgeon has said that independence transcends the case for the economy.”

Mr Lockhart pointed to the Tories’ recent Uk-wide industrial strategy which sets out a “sectoral approach” and called on the Scottish Government to back a “new approach” which harnesses strengths in different sectors.

Labour’s Jackie Baillie said the Scottish economy has grown by just 1.2 per cent over the past decade, which is “really small” compared to the preceding seven years when there was 17 per cent growth.

She said: “The thing that’s been common in the past ten years has been the constant obsession with independence and I have to say when you talk to businesses, businesses hate uncertainty. They didn’t like Brexit because of the uncertainty, they don’t like the constant threat of an independence referendum because of the uncertainty.”

She said action is now needed to “make a difference” to Scottish growth and called for greater investment in smaller companies to ensure they tap into export opportunities to grow the economy.

Scotland has been lagging behind the UK economy for a number of years following the crash in global oil and gas prices which gathered pace towards the end of 2014.

The FAI report last week raised broader concerns that the slowdown in Scotland’s economyseemstohavespread across a wider set of industrial sectors than was previously the case. In the last quarter of 2016, activity in the manufacturing and construction sectors fell, while services did not grow at all.

It said the divergence between the UK and Scots economies makes it “hard to argue” Brexit is the cause of the slump north of the Border.

Services – about 75 per cent of the economy and less exposed to external conditions – grew nearly twice as