BBC BLOGS - Douglas Fraser's Ledger
« Previous | Main | Next »

'Volatile for the foreseeable future'

Douglas Fraser | 21:00 UK time, Friday, 4 March 2011

Scotland's unemployment predicament has looked slightly less unimpressive in recent months, though it's been hard to tell why.

After a start to the recession that saw its relatively strong employment picture stay ahead of the UK, the start of last year saw that sharply reversed. Then at the end of the year, Scottish unemployment starting falling a bit while employment rose.

The economic brains resident at the Fraser of Allander Institute have been considering why this might be, and this week's report (I'm catching up with it, after several days away from the coalface) has a sort of explanation.

It may be that Scottish jobs were lost during the downturn at a faster rate than in the rest of the UK because employers in the rest of the country hoarded their valued staff. Scottish employers may not have valued employees quite as highly - or they weren't so willing to keep paying them for under-production.

Come the upturn and a slow recovery, the labour hoarding in the rest of the country means that expanded production can be achieved without taking on extra workers, while in Scotland it means more recruits are needed.

We heard from Scottish Engineering trade body, with a generally upbeat assessment of its members' order books, that recruiting young people with the necessary skills is returning as a growing concern.

Consumers lacking confidence

The second explanation offered by Fraser of Allander is that the shift between full-time and part-time jobs is operating differently in Scotland from the rest of the UK. Improving employment figures could be explained by relatively more part-time jobs being created in Scotland.

The economists don't seem strongly persuaded by that argument, reckoning that perhaps there's a combination of such explanations. And with public sector cuts, they don't expect the improving trend at the end of 2010 to be sustained.

With consumer confidence in a parlous state, they have also cut back their growth forecasts slightly.

This hefty tome was published in a busy week for upsumming. Andrew Goudie, who has only a few months left before his retirement as chief economic adviser to the Scottish Government, published his occasional, easily-digested update on the world, UK and Scottish economies.

While having a civil servant's caution, there's a strong hint that the official growth figures for the final quarter of last year are not going to look good. The UK figures plunged to a 0.6% contraction, and it looks like Scotland's figures - once Dr Goudie's statisticians catch up with them - will be in the same region.

He concludes that GDP growth is likely to remain "volatile for the foreseeable future". This is to be expected at this stage in the recovery, but there may be some amplification by temporary factors such as the severe weather. Output is expected to remain below pre-recession levels until well into 2012.

Sophisticated businesses

Both of these surveys highlight structural problems, with Fraser of Allander talking of an "intrinsic competitiveness problem". It cites evidence that Scottish labour productivity growth is weaker than the UK, yet labour costs are about 3% lower. The logical conclusion: low investment and low capital per worker are not the only problems.

In short, Scotland's not doing enough with the resources it's got, including its workers. And its export base is too narrowly focussed, and declining.

The recipe for growth is a familiar one with a twist; developing companies of scale, attracting inward investment, boosting innovation, research and development and something called "business sophistication". Apparently, that includes leadership and enterprise.

From Inverness, independent economist Tony Mackay this week offers another survey of the Scottish economy, gently reminding readers that the past five years have seen more accuracy to his forecasting record than others.

His forecast for this year is 1.6% growth, while Fraser of Allander prefers the look of 1%. Next year, FoA says 1.6%, while Mackay Consultancy says 2.1%.

With much statistical analysis in this publication, Tony Mackay seeks to sum up the position of the Scottish economy with a telling illustration.

So he's chosen the vastly expensive Royal Navy submarine, HMS Astute, aground off Skye last year - lying stranded, waiting for help, and pointlessly belching fumes.


  • Comment number 1.

    An oversimplification to be sure, but Scots tend to be happy to work to live whilst others (esp. down south) live to work.

    A Scot with enough money to meet his/her immediate needs (and wants) is by and large a happy individual, not constantly thinking about how to increase financial wealth for the sake of it (rather than to meet a specific need).

    Hence, part-time work in Scotland is not seen as overly negative, provided it is reasonably paid - and the National Minimum Wage ensures that it is. The outcome is that people have a liveable income together with the time to enjoy the opportunity to spend/enjoy residual income.

  • Comment number 2.

    Maybe it`s just me but I always find Douglas Frazers writings very negative.

  • Comment number 3.

    Very very negative.
    A sad picture that is painted. Inward investment does not seem to work here, we are not aggressive enough at holding on to it. Examples:
    In the 1980's Scotland made more semi-conductors than anywhere in Europe.
    In the 1980's Scotland made 80% of the computers used in Europe.

    Both these industries continued to expand and grow, other than a few servers, no computers are made in Scotland, no semi-conductor industry.
    We need to hold on to the investments we have. No more United Biscuits, a Scottish Company that, till its purchase of Tunnochs, had stopped making things in Scotland.

    Scotland needs to invest in a spread of bets, in particular, local enterprise. Too often small business has been starved of its ability to invest in growth and their local communities.

    I know a story where a small business of 12 people was starved for 18 month of their ability to grow because Falkirk Council has a higher priority in storing Christmas decorations in the only suitable nearby unit. Instances like this should be met with immediate reassignment of the council employees involved in helping local businesses, our history is littered with similar examples. (Fife Council and the massive £100m factory that has never been used - the impact on home grown jobs).

  • Comment number 4.

    Also, why have a link on this page to a BBC interview that was on the 7 day listen again limit? (dispute over how to pay for the next Forth Bridge)


BBC © 2014 The BBC is not responsible for the content of external sites. Read more.

This page is best viewed in an up-to-date web browser with style sheets (CSS) enabled. While you will be able to view the content of this page in your current browser, you will not be able to get the full visual experience. Please consider upgrading your browser software or enabling style sheets (CSS) if you are able to do so.