Scottish economy in double-dip recession

The latest official figures show Scotland has followed the UK into a double-dip recession

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Scotland has followed the UK into a double-dip recession, according to the latest official figures.

Scottish Gross Domestic Product (GDP) fell by 0.1% during the first three months of 2012.

Output in construction fell sharply by 6.9% while the production sector grew by 1.2% and services by 0.2%.

But there was some good news with unemployment falling for the fourth month in a row, leaving the Scottish jobless rate at 8%.

First Minister Alex Salmond called on the UK government urgently to stimulate economic growth and jobs, following the publication of the new figures.

The Scottish economy shrank by 0.1% in the final quarter of last year, compared with a drop of 0.4% for the UK as a whole.

Recession is defined as two consecutive quarters of the economy contracting.

In April the UK economy officially returned to recession, with ONS figures showing a further contraction of 0.3% for the first quarter of 2012.

A double dip of recession underlines the economic gloom, backed by plenty other evidence of a stuttering economic performance.

But it's hard to reconcile it with the latest jobs figures, showing another month of private sector resilience in recruitment.

In any case, winter saw the shallowest possible recession - losing less ground in two quarters than the economy lost in the snow-hit final three months of 2010.

It also lost much less ground than the UK as a whole - unless, that is, you factor in the flow of oil and gas. The steep decline during last year hit UK figures hard, but that's not counted in Scottish ones.

The more significant picture is how little growth there has been since a one-off bumper quarter in spring 2010. Scotland is still far short of recovering ground lost in the deep recession of 2008-09.

The building industry is, statistically at least, what's doing the damage. In other sectors, notably in energy, there are brighter spots and stronger prospects.

Are we still in recession now? The UK figures for the second quarter of 2012 are out next Wednesday, and the second quarter data for Scotland won't be with us until 19 October.

The latest figures came as Scottish Retail Consortium figures showed shop sales have continued to stagnate.

And the Scottish Chambers of Commerce last week published its Business Survey which painted a bleak economic picture.

Reacting to the latest data, Mr Salmond said: "These new figures show Scotland has a higher employment rate than the UK as a whole and that our economy continues to demonstrate greater resilience than the UK.

"But it is clear that the UK government's austerity agenda and the prime minister's failure to heed calls for direct investment in construction and infrastructure is hampering progress."

Labour's Shadow Economic Secretary to the Treasury, Cathy Jamieson, said "urgent economic growth strategies" were now needed.

"It's time that both the UK and Scottish governments realised the scale of the crisis, and changed course," she commented.

"Jobs and growth must be the top priorities. We cannot afford to waste the talents of generation of young Scots because of failed economic policies."

Scottish Lib Dem leader Willie Rennie said the figures showed that, like the rest of the UK, Scotland was "not immune from global economic forces".

He added: "These figures show that it is even more vital for both the UK and the Scottish government to work hand in hand on projects like the £1bn UK Youth Contract that helps young people find work and training opportunities."

'Dramatic slump'

The Scottish Building Federation said the latest data showed a sixth consecutive quarter of stagnation in the Scottish construction industry.

Chief Executive Michael Levack said: "Such a dramatic slump requires radical action to turn things around.

Start Quote

We have a pretty flat economy but there are sectors in Scotland seeing increasing growth and success”

End Quote Liz Cameron Scottish Chambers of Commerce

"That's why we give our full backing to the calls the first minister is now making on the UK Treasury to release £400m in direct capital spending this financial year to kick-start the long list of shovel-ready projects north of the border that have stalled due to a chronic lack of affordable finance."

The Scottish Chambers of Commerce said the GDP and unemployment figures presented "an increasingly heartening picture for much of the Scottish economy".

Chief executive Liz Cameron said: "We have a pretty flat economy but there are sectors in Scotland seeing increasing growth and success."

She added: "The overall (GDP) figure is down due to the continuing difficulties faced by the construction sector.

"This is an area where government investment in infrastructure can have a positive effect - we need to see the pledged government projects get underway for the construction industry to reap the practical benefits of what are welcome commitments to invest."

'Focus on growth'

The Federation of Small Businesses in Scotland said it was "unsurprising" that Scotland had followed the UK into a double-dip recession.

Scottish policy convener Andy Willox said: "We can take some comfort from the fact that Scotland's economic contraction looks smaller than the rest of the UK.

"However, we still need every part of government to shelve the distractions and focus on growth."

The Scottish Trades Union Congress (STUC) said a "robust demand-led recovery" appeared as remote as ever.

General Secretary Grahame Smith commented: "As the STUC has consistently highlighted, the headline statistics do not tell the full story of what is happening in the labour market.

"A recent Scottish government report confirms that underemployment or involuntary part-time working was heading towards the quarter of a million mark in Scotland at the end of 2011.

"When the economy does eventually recover, Scotland risks being left with a labour market increasingly characterised by part-time, low wage, insecure employment."

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