The highly respected Fraser of Allander Institute added to the gloom when it sharply cut its forecasts, warning that our chances of avoiding recession were falling with the eurozone crisis. It halved projected growth in Scotland’s GDP (gross domestic product) this year to 0.4 per cent and cut its forecast for 2012 from 1.5 per cent to 0.9 per cent. The institute also warned about the health of key sectors – especially financial services.
Professor Brian Ashcroft, who edits the Fraser Commentary, said he was “not sanguine” about the eurozone problems. He warned any major debt default in Italy would be “catastrophic for the global economy and catastrophic for the Scottish economy”. In fact, he sees what is happening across the Channel as a warning when it comes to the independence debate, noting that “you can’t have fiscal autonomy within a monetary union”.
Now comes the Bank of Scotland’s Purchasing Managers Index, which samples opinion among businesses across the country. It was almost a relief to see that it was still showing a little growth in the last month – but only just; and, like the other forecasts, the index been getting steadily weaker with the fall in outstanding work the worst since April last year.
“The pace of growth fell to its lowest level for ten months while new business orders fell slightly for the second consecutive month,” said Donald MacRae, the bank’s chief economist. “Input cost pressures eased but remain strong. The Scottish economy is showing resilience in the face of the global slowdown, but is struggling to maintain growth momentum.”
The alarm bells are also being rung by the Chartered Institute of Personnel and Development. Its quarterly update of personnel managers suggests that UK employers are “braced for a slow, painful employment contraction”. They are, it says, in “wait and see mode” while they see how tough things become as the winter draws on.
Enter the Federation of Small Businesses in Scotland, with its own survey. This tells of the gloom felt by smaller firms as they face increased overhead costs – 84 per cent reported a rise, with higher utility bills, raw materials and finance costs. The FSB wants SMEs (small and medium enterprises) to be protected from the “sharp practice” of power companies using lock-in clauses.
The FSB also added its voice to those denouncing the government’s sudden cut in the subsidy for solar energy installations. The amount you will get from feeding the power generated into the National Grid will be halved from April. It warns that we can expect small installers to go from boom to bust after some record years.