Scotland’s economy: glass half full or half empty?

Posted on 18/04/2014 by



Just how real is the economic recovery? For some, the future’s certainly looking brighter but for many more life continues to be a daily struggle … 

The economic recovery in Scotland is now becoming more embedded, Scotland Office Minister David Mundell said yesterday. Commenting on the latest Scottish Chambers of Commerce business survey, Mr Mundell also stressed that there was further work to be done.

Mr Mundell said: “As today’s Scottish Chambers of Commerce survey and other recent business surveys confirm, optimism amongst Scottish businesses continues to grow. Key performance measures have reached levels not seen since 2007 which is leading to more and more Scottish businesses looking to recruit new staff.

The manufacturing sector continues to show robust growth with investment at its highest level in six years and export orders increasing for five consecutive quarters.

“As part of the UK, Scotland is doing well. Whilst our economic recovery is becoming more embedded there is still much work to be done. The Budget set out the next stage of our long term economic plan, making it easier for Scottish businesses to invest, to take on new staff and excel on a global stage.”

With business confidence rising, The Scottish Chamber of Commerce sees a brighter economic future for Scotland, The business organisation released their Business Survey results for the first quarter of 2014 yesterday.

“The hard work and determination of Scottish businesses is yielding positive outcomes for the growth of Scotland’s economy. All the indicators in this survey point to sustained economic growth as key sectors increase investment to expand activity, boosted by higher levels of business optimism”, said Scottish Chamber of Commerce Chief Executive Liz Cameron.

“Investment intentions of Scottish businesses are encouraging with the manufacturing industry showing superb results with higher levels of investment than at any time in the past 6 years and robust growth in export orders shown by a consistent increase over 5 consecutive quarters. Whilst investment levels in the construction sector remain low, for only the second time in 5 years investment has not declined, and over 70% of businesses in the sector have either maintained or increased commercial and domestic orders compared with the last quarter. Promisingly, almost 90% of construction businesses surveyed expect employee numbers to remain the same or increase in the next 3 months and less than 14% reduced employment in the previous quarter.

“Higher levels of business optimism in construction, wholesale, retail and tourism is a positive signal for continued growth, as all sectors reported higher levels of confidence in Q1 2014 compared with the same quarter last year.

“However, despite these positive indicators, challenges still remain. The retail industry is expecting a decrease in profitability in 2014 which may point to stalled consumer confidence and seasonal patterns, but benefit may be drawn from positive growth in the tourism sector as confidence levels among hotels remained high and a rise in the use of conference facilities was also reported.

“The issue of skills shortages is becoming more prominent as businesses look to expand and invest. Businesses in the manufacturing sector are reporting difficulties in recruiting skilled & technical staff and the tourism sector are also reporting difficulties in recruiting managerial staff and chefs. It is vital that the organisations responsible for the development of skills provision, actively work with the business community to ensure employees are provided with the skills required to succeed.

“The buoyancy and optimism of Scottish businesses is to be commended but Governments in Scotland and the UK must facilitate opportunities for businesses to access affordable finance, particularly as cash flow remains a pertinent issue for businesses in construction and manufacturing. Alongside this, efforts to export internationally must be strengthened by policy makers to enable Scottish businesses to take advantage of global trade opportunities.”

However other senior figures believe the latest figures don’t tell the whole story and that much still needs be done – particularly for the lowest paid.

Responding to the latest Labour Market and GDP statistics Scottish Trades Union Congress (STUC) General Secretary Grahame Smith said: “These figures include some more positive news on the Scottish labour market but confirm that recovery remains very slow. As some focus on the level it is important to stress that the employment rate – a significantly more accurate measure of the health of the labour market – remains fully 3.5% below its pre-recession peak.

“Youth unemployment continues to stagnate at a high level with the unemployment rate for 16-24 year olds falling by only 0.1% in the year to December. We also know that far too many of the jobs that are being created are low paid and insecure whilst the number of those needing more hours at work to make a decent living remains far too high.

“STUC is not unduly concerned by the fact that Scottish GDP growth in the last quarter of 2013 was much lower than for the UK as a whole. We expect growth to catch up in the subsequent quarter. Far more concerning is the overall lack of evidence of economic rebalancing in Scotland and across the whole of the UK.”

And earlier this week The Trussell Trust, the UK’s largest foodbank network, reported that over 900,000 adults and children have received three days’ emergency food and support from Trussell Trust foodbanks in the last 12 months, a 163 per cent rise on the previous year’s numbers. The charity says that despite signs of economic recovery, the poorest have seen incomes squeezed even more than last year and more people are being referred to foodbanks than ever before.

The Trussell Trust’s Chairman, Chris Mould, said: ‘That 900,000 people have received three days’ food from a foodbank, close to triple the numbers helped last year, is shocking in 21st century Britain. But perhaps most worrying of all this figure is just the tip of the iceberg of UK food poverty, it doesn’t include those helped by other emergency food providers, those living in towns where there is no foodbank, people who are too ashamed to seek help or the large number of people who are only just coping by eating less and buying cheap food.

“In the last year we have seen things get worse, rather than better, for many people on low-incomes. It’s been extremely tough for a lot of people, with parents not eating properly in order to feed their children and more people than ever experiencing seemingly unfair and harsh benefits sanctions.

“Unless there is determined policy action to ensure that the benefits of national economic recovery reach people on low-incomes we won’t see life get better for the poorest anytime soon.

“A more thoughtful approach to the administration of the benefits regime and sanctions in particular, increasing the minimum wage, introducing the living wage and looking at other measures such as social tariffs for essentials like energy would help to address the problem of UK hunger.”