Economic outlook is 'slow and fragile'

Friday, January 22, 2010

Scotland is expected to experience a "slow and fragile" economic recovery, business leaders have warned.

The Scottish Chambers of Commerce (SCC) says that while firms are in a better position than they were twelve months ago they face an uncertain year ahead.

The comments come as it was announced that Scotland's GDP fell by 0.2 per cent in the third quarter of 2009 and 4.6 per cent over the year. From July to September the service sector and construction sector fell by 0.3 per cent and 1.6 per cent, respectively, while the production sector grew by 0.9 per cent.

Over the course of the year till September all sectors declined: by 3.5 per cent in service; 8.4 per cent in production; 8.9 per cent in construction.

SCC Head of Policy and Public Affairs, Garry Clark said: "Scottish business is clearly in a better position at the start of 2010 than it was twelve months ago, but our latest survey reveals that we cannot take the recovery for granted and that this year is likely to pose further challenges to our fragile economy.

"Pressures on national, devolved and local Government budgets are likely to increase in 2010, and together with a possible weakening in consumer spending, coupled with increased pressures on margins as a result of rising raw material and energy costs, these could threaten the emerging and fragile recovery."

Finance Secretary John Swinney said: "The decline mirrors a fall in UK GDP for the same period, while Scotland continues to have higher employment, lower unemployment and higher economic activity rates than the UK as a whole.

"Growth in the production sector coincided with an increase in Scottish manufactured exports. While this is welcome news, the challenge now is to get all sectors of our economy moving and lift Scotland out of recession. Our Economic Recovery Plan continues to have a central role in coordinating our response to the downturn. We are absolutely committed to investing in jobs and keeping our economy moving in these tough times."

Responding to the figures, CBI Scotland's Director Iain McMillan said: "These official figures from the third quarter of last year highlight the depth of the downturn and the continuing fragility of Scotland's economy. However, our more recent industry survey paints a more encouraging picture and suggests that we may well be on the cusp of a modest improvement in business and economic prospects, though it is likely to be much later in the year before anything like meaningful growth resumes.

"Nothing can be taken for granted however, underlining the need for government to continue to do all it can to aid businesses to take full advantage of the recovery. The competitiveness of and prospects for Scots firms are greatly strengthened when government keeps a tight lid on those costs under its control that affect business, and when important GDP-enhancing investments in much needed infrastructure and support for enterprise are protected."

It followed the news that unemployment in Scotland rose by 9,000 in the three months from September to November. The unemployment rate now stands at 7.4 per cent, with 202,000 people out of work - an increase of 61,000 over the year.

In the UK as a whole, the jobless total fell by 7,000 to 2.46 million, with the unemployment rate at 7.8 per cent.