By Russell Bruce
Higher employment levels and record inward investment in Scotland is now bringing growth in the Scottish economy back to levels not seen for 7 years.
As the recession finally heads for the dust, confidence is growing again after one of the biggest recessions in history and one with the slowest pace of recovery.
Internationally the US has led on growth, but the US has stalled in the latest statistics with growth contracting at an annualised -2.9% in the first quarter of 2014.
Most western countries have faced a protracted rate of growth, keeping economic activity below pre-recession levels.
If like me, you remember recessions in previous decades, Scotland was last into the recovery period and first to feel the draught of the next recession. Times have changed and by concentrating on the new growth industries, the Scottish economy has been repositioned from its aging structure in the second half of the twentieth century.
The latest Business Monitor from Bank of Scotland shows the Scottish economy performing at pre-recession levels. The report notes:
‘Turnover trends are showing the best results in almost seven years and expectations for the rest of the year remain elevated at levels last seen in 2007.
‘Expectations for turnover in the next six months are showing an overall net balance of +36%. This is similar to the +37% of the previous quarter and up on the +13% of the same quarter one year ago. Whilst 44% expect turnover to be static in the next six months, 46% expect turnover to increase against 10% who expect a decrease. Service firms are slightly more optimistic than production firms, with service firms showing an overall net balance for turnover for the next six months at +38% compared to +32% for production firms.’
Donald MacRae, chief economist, Bank of Scotland said, “The surge in economic activity identified in summer 2013 has been maintained into summer this year. Expectations are at their highest level since mid 2007, suggesting the recovery will continue throughout 2014. Further increases in investment by firms would enhance the recovery.”
How Scotland can follow a different style in managing the economy
Given the stalling of growth in the US, this is an excellent result for the Scottish economy. It is not an accident and much of the credit goes to a Scottish Government that has invested in economic development throughout the recession and brought forward capital investment to maintain and support jobs and economic activity.
The Scottish Government has 30 offices of Scottish Development International (SDI) – from Canada to Brazil, China to Japan, Germany to Dubai. Their role is to drive inward investment and support Scottish companies in developing new export markets.
Regrettably, there is a general lack of awareness of the global reach of Scotland’s economic development policies and the drive to open Scotland up to new investors and push our continued outperformance as an exporting nation compared to the UK.
Speaking at the public cabinet meeting in Selkirk last week, Alex Salmond underlined that the benefit of this activity ended up with the extra tax revenues going to the Treasury in London.
In a reply to this reporter, on how he would manage the revenues and find expenditure savings with the full powers of an independent Scotland, the Cabinet Secretary for Finance, John Swinney, emphasised that the way to reduce the cost of unemployment was to help people into employment.
This is a very different approach to economic management from the Conservative/LibDem government’s cost cutting agenda, attacking the most vulnerable and hard pressed in our society. Only control of all of Scotland’s tax revenues and all social expenditure enables a co-ordinated drive to increase economic activity, thus sharing the benefits of a prosperous country and creating a more equal society.
Alex Salmond stressed to the meeting that no amount of pleas to the Treasury would result in the Treasury handing over these increased tax revenues, due to higher levels of Scottish economic activity. Only independence could ensure Scotland’s tax revenues accrue to the Scottish Government for Scottish priorities.
0.6 % represents 8000 more people in Scotland in employment
Our diagram shows the relative performance of the four nations of the UK in maintaining employment levels.
The trend indicates Scotland’s employment levels have been on an upward curve since the establishment of the Scottish Parliament, with Scotland catching up with employment levels in England and moving ahead of England’s performance by 2007. The global recession affected employment levels in all four countries, but Scotland’s recovery has kept pace with England’s and continues to edge ahead.
Professor David Bell of Stirling University, an expert on the labour market, has described Scotland’s higher level of employment as marginal. Whilst statistically it may be marginal, to the additional 8000 of Scots in employment as represented by 0.6% it will feel they have moved out of the margins. The average quarterly higher rate of employment in Scotland over the last five quarter since January 2013 Is 0.5%.
Source for the diagram of employment levels in the four nations of the UK:
ONS Labour Force Survey, Seasonally Adjusted Dataset, table 51, Scotland
Source 0.6% equivalent: Summary of LFS headline indicators, ONS, May 2014.