Scottish economy slows and now trailing far behind UK as a whole, study finds

New analysis has found that Scottish GDP has grown by just 4 per cent in cash terms since 2008, compared with 23 per cent for Britain as a whole, according to new research.

The study by the economist Professor John McLaren, who is an honorary professor of public policy at the University of Glasgow Business School, also confirmed that the recent North Sea oil slump caused a significant fall in GDP last year.

According to the research, Scotland’s gross domestic product declined by 1 per cent in cash terms over the past 12 months.

The findings follow HM Revenue and Customs data released in April that revealed North Sea tax receipts had slumped last year to just £35m – the lowest for 40 years.

Prof McLaren, who also chairs the independent public spending watchdog Fiscal Studies Scotland, cited the decline in North Sea oil profitability as largely to blame for the recent fall, but Scotland’s latest quarterly national accounts also found that the country’s trade balance had also been badly hit, greatly weakening its public accounts.

Prof Mclaren’s data suggests as a percentage of GDP, Scotland’s trade deficit with the rest of the UK and overseas markets was now -9.8 per cent, the worst figure since Scottish devolution in 1999 and worse than that previous low of -8.5 per cent in 2007. Scotland’s deficit now stands at nearly £15bn in cash terms on the back of a surge in imports from the rest of the UK, he found.

Prof McLaren said: “Scotland’s economy continues to show worrying signs of North Sea related distress. Due to falling oil revenues, overall Scottish public sector revenues were lower in 2015 than at the height of the downturn in 2008.”

“There has also been a virtual standstill in GDP per capita since 2008, which has resulted in it falling below the level seen for the UK. The worsening trade position, largely with respect to the UK, is also a big worry, especially the fall in exports last year to the rest of the UK.”

It was also found that public sector revenues also fell for the fourth year in a row, by nearly 12 per cent in real terms.

Scottish public spending is currently £1,400 a head higher than the UK average. The latest government expenditure and revenue data for Scotland showed it had a public spending deficit in 2015 of £15bn.

The Scottish National party said the data showed that even with the oil industry slump, Scotland’s per capita GDP was comparable to the UK average, at £28,385 against £28,634 for the UK.

“Scotland remains the most prosperous part of the UK per head outside London and south-east England and is currently experiencing the longest period of uninterrupted economic growth since 2001,” a spokesman said.

Scotland’s latest unemployment rates jumped above the UK average, adding to business nervousness, after a long period of relatively better figures.

The SNP insisted the country’s economy was still strong, with among the highest levels of overseas investment in the UK. “We have regularly outperformed the rest of the UK when it comes to jobs, with recent months seeing employment levels at record highs while our female employment rate is among the highest in Europe,” the spokesman said.

Meanwhile, the Scottish Government’s Retail Sales Index has this week shown that the first quarter of 2016 saw the value of retail sales in Scotland nudged up 0.1 per cent, after a decline in the final three months of last year.

David Lonsdale, director of the Scottish Retail Consortium, said: “The resumption of growth – albeit meagre - in the headline value of retail sales in the first quarter of this year is encouraging, but the figure looks less rosy once falling shop prices are taken into account. With the value of retail sales over the past year as a whole decidedly flat this suggests a continuing fragility to consumer confidence in Scotland, despite lower prices in shops and at the petrol pump and average pay rises outstripping inflation.

“The prospects for retailers are ultimately determined by the state of the economy and their own ability to adapt and seize on the opportunities that arise. Our new MSPs can help by channelling their collective energies into ensuring that the retail industry, Scotland’s largest private sector employer, is even better placed to be able to invest, expand and create jobs. Policies which put money into people’s pockets, keep down the cost of doing business and encourage retail investment and expansion should be prioritised.”