Scotland in 2008: the one growth industry is in headless chickens

Scotland in 2008: the one growth industry is in headless chickens


Bill Jamieson

Executive Editor

The Scotsman




FOR those hoping that relentless changes in enterprise ministers and the shedloads of money poured into Scottish Enterprise might now be helping to lift Scotland’s economic performance comes a blunt warning this week: think again.


A new medium-term forecast to 2008 shows our economy slowing over the next two years, with only a modest recovery to growth of 2.1 per cent in 2008.


Average annual growth in Scotland’s GDP over the period is put at just 1.75 per cent. This is below the annual average growth rate of 2 per cent experienced in the 1990s.


Arguably more depressing is the prospect that the Scottish economy will continue to underperform the UK.


The forecasts come from Mackay Consultants. Its track record in recent years has been fairly good. Indeed it has helped badger the Scottish Executive into using a new methodology that has helped give more accurate figures.


It is hard not to feel a deep sense of frustration and despair if these forecasts prove to be anywhere near accurate.


There are bright spots and it is vital not to overlook them. Financial services look set to continue the encouraging growth in recent years. And retail, business services and transport are all expected to perform above average.


In addition, the headlong decline in electronics should bottom out next year. But what a double-edged sword this is. It is this decline that has acted as an anchor on our overall performance in recent years. Tony Mackay estimates output to have slumped by 17 per cent in 2001 and by more than 20 per cent in 2002.


But the ending of this headlong fall has not brought a rebound in our overall performance. Indeed, as the sector stabilises and recovers, it poses the most searching questions about performance elsewhere.


The full 106-page report, Prospects for the Scottish Economy 2005-08 (inquiries to,) should be required reading for anyone concerned with our longer-term outlook and how we can springboard our way out of the post-devolution trough.


Those who hoped devolution would be a catalyst for improved economic performance have had a rude awakening. We have gone through four enterprise ministers in five years. Now we are on the fifth.


We have had Smart, Successful Scotland, then Refreshed Smart Successful Scotland. Few could tell the difference.


Scottish Enterprise is now on its third chief executive over this period. There have been re-organisations, fresh initiatives, new strategies, policy statements, boardroom reshuffles, targets, recalibration of targets, abandonment of targets, new priorities and a collective commotion that would put headless chickens to shame.


Jack McConnell, the First Minister, famously declared that the economy was his top priority. But there is no sign of improvement, still less a closing of the performance gap with the UK. Indeed, economic performance in Scotland now seems to depend entirely on the rest of the UK experiencing a sharper slowdown. Only this way do we seem to stand a chance of looking good.


On the Centre Left there has been the equivalent of a collective nervous breakdown. When it comes to fresh ideas, policy wonks now earnestly tell us that conventional economic measures are misleading or inadequate. Instead we should be measuring ‘life happiness’ and contentment. That this is seriously advanced beggars belief.


Within the Scottish Parliament there is barely a handful with any experience of business. Regulations pile up and pleas for cuts in business tax fall on deaf ears. When the economy is talked about at all, it is seen as a set of functions performed within the public sector. Of the real economy – the world outside the public sector bubble (and, boy, has this not inflated like a bubble) – there is barely any first-hand knowledge or conception of the problems.


Ministers are imbued with the doctrine of market failure, blind to the evidence that public failure – from the parliament building to the costs of planning blight – are never so evident or pronounced.


Tourism should be one of our booming industries. The Executive has hurled tens of millions of pounds at tourism-industry marketing and reorganisation.


Yet, as the Mackay report scathingly points out, the figures from VisitScotland, formerly known as the Scottish Tourist Board, ‘are in a shambolic state’.


Within the Executive itself there are no meaningful or helpful tourism figures. The result, MacKay says, is that ‘it is difficult to discern the real trends’.


This for an industry that should be one of our top performers. For the record, the sobering figures revealed in a parliamentary answer yesterday may focus minds.


Visitors from overseas to Scotland have fallen by 20 per cent between 1998 and 2003 and visitors from countries such as Canada and France have fallen by about 35 per cent in the same period.


Here is one sector that resembles the economy overall in this respect: it needs a wake-up call.


Changing all this to get a top-line improvement is going to be neither easy nor straightforward. But change there must be if Scotland is to have any presence in the world. We are heavily dependent on the performance of the UK economy overall and the policies and taxes laid down by the Chancellor at Westminster. Mackay calculates that some 37 per cent of the change in economic output in Scotland last year can be explained by what happened to the UK economy. The European Union is thought to account for 22 per cent and the world economy 9 per cent.


Among the forecast bright spots over the period 2004-8 are financial services, health and social work and public administration (at least we excel in that).


Suggestions, perhaps, to the new Futures Forum?