The Scottish Government published some disappointing economic figures this morning. From the publication Scotland’s Gross Domestic Product, Quarter 4 2016:
- In the fourth quarter of 2016 the output of the Scottish economy contracted by 0.2%, after 0.1% growth in 2016 Q3. Equivalent UK growth this quarter was 0.7%.
- Scottish GDP per person contracted by 0.3% during the fourth quarter of 2016.
- In the fourth quarter of 2016 output in the services industry in Scotland was flat (0.0% change), while production contracted by 0.9% and construction contracted by 0.8%.
- Compared to the same period last year (i.e. 2016Q4 vs 2015Q4), the output of the Scottish economy was flat (0.0% change). Equivalent UK growth was 1.9%.
- Over the calendar year (i.e. 2016 vs 2015) Scottish GDP grew by 0.4%. Equivalent UK growth was 1.8%.
Professor Graeme Roy, director of the Fraser of Allander Institute:
“With any Brexit uncertainty affecting the UK as well, it’s hard to argue that Scotland’s relatively weaker performance can be explained by the outcome of the EU referendum.
“While the downturn in the Oil and Gas sector remains part of the explanation, it is difficult to ignore the substantial declines in construction over the past year (-6.0 per cent) or in Manufacturing (-7.3 per cent)—with all areas of manufacturing, not just those tied to the North Sea supply chain, shrinking during 2016.
“A new concern is the exceptionally weak performance in the all-important Scottish services sector, which saw no growth at all during the final three months of 2016.”
Why the poor performance? Stuart McIntyre, lecturer in economics at the University of Strathclyde, tweeted that weak consumer confidence might be starting to affect real activity, and that investment demand is weak. Angus Armstrong, Director of Macroeconomics at The National Institute of Economic and Social Research, responded to our query on Twitter and suggested that problems in the oil industry were likely a significant factor in causing Scotland’s low output. But he added that the unresolved constitutional question may also be playing a part.
Update, 18:30: The Fraser of Allander Institute has published a blog post summarising today’s figures: 7 Bullet Points on the GDP data released today.
Update, 23:00: Douglas Fraser has posted an excellent article over at the BBC website. He notes that “[t]he numbers for the final quarter of 2016 make it hard to argue that the downturn has been all about the oil and gas slump, because the stalled, becalmed and contracting bits of the economy are much more widely spread.” He cites a number of possible reasons for Scotland’s poor economic performance, including “low business start-up and growth rates, the lack of corporate headquarters in the country, and relatively poor research and development spending by businesses.”