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Index of Manufactured Exports

'Toxic mix of unemployment and low growth' – Johann Lamont <em>Picture: Scottish parliament</em>

'Toxic mix of unemployment and low growth' – Johann Lamont Picture: Scottish parliament

The latest figures on the Scottish economy offer a confused picture. Unemployment rose in Scotland by 19,000 to 231,000 in the three months from September to November. That is likely to get worse if the Bank of Scotland’s Report on Jobs proves to be a reliable barometer, since it shows that the labour maket “lost further momentum” last month.

In the view of Donald MacRae, the bank’s chief economist, the jobs market is reflecting the slowdown in the Scottish economy. “Growth in the number of vacancies slowed,” he says, “while the number of people appointed to jobs fell for the first time in 15 months. The economy is struggling to maintain growth momentum in the face of the global slowdown.”

The Office for National Statistics reports that the number of people claiming benefit fell by 1,400 in December. However, it is up 3,100 on a year ago to a new total of 140,900. All told, it means that the Scottish unemployment rate is now 8.6 per cent, higher than the UK average of 8.4 per cent. Unemployment across the UK rose by 118,000 to 2.68 million.

The news prompted the Scottish finance secretary, John Swinney, to repeat his call for a UK-wide jobs summit to agree an immediate programme of employment creation. “These new figures,” he explained, “show that there is a need for further sustained activity to support Scotland’s economic recovery.

“That is why the Scottish government is using every lever currently available to us to secure new investment and create and safeguard jobs, including our new initiative this week to establish four enterprise areas for Scotland.”

According to Scottish secretary, Michael Moore, “There can be no clearer signal we need to focus on getting the economy back to health than the rise in unemployment shown by these figures. We have to get Scotland back to work and it is imperative we keep making the right decisions to support and grow our economy.”

But Scottish Labour described the news as “a bleak day” for Scotland. Party leader Johann Lamont talked of Scotland being “in the grip of a national crisis, with unemployment figures reaching disaster levels and even worse than the rest of the UK. We face a toxic mix of unemployment and low growth in Scotland. This needs a crisis response from the Scottish government.”

That was a view shared by Grahame Smith, general secretary of the Scottish Trades Union Congress (STUC). “The recent rise in Scottish unemployment is as dramatic as it is shocking,” he said. “As late as November last year Fraser of Allander were forecasting unemployment of 234,000 by the end of 2012; we are nearly there already.

“The coalition government,” he added, “needs to urgently consider whether it regards high and rising unemployment as a priority issue. If it does, then the problem demands a wholesale revisiting of its failing economic strategy. As things stand there is almost no prospect of the labour market improving over the next couple of years and Scotland is almost doomed to exit this depression with significantly higher levels of structural unemployment”.

By contrast, the Federation of Small Businesses in Scotland said concerted action was needed to encourage job creation and confidence in the Scottish economy. In the view of Andy Willox, Scottish policy convener, “Action on spiralling small business overheads could give firms the boost they need. Only by taking co-ordinated action right across local, Scottish and UK government will we stand a chance of turning this worrying situation around.”

But it is not all bad news. There appears to be some hope from the latest Index of Manufactured Exports for the third quarter of 2011. It found that Scottish manufactured export sales grew by 0.2 per cent in real terms over that period. On an annual basis, it suggests that manufactured export sales grew 2.7 per cent in real terms year-on-year.

It prompted CBI Scotland‘s director, Iain McMillan, to say that “This latest official data shows a welcome continuation in the growth of Scottish exports, reflecting the findings in our own latest industrial trends survey, but does point to a loss of momentum over recent quarters.

“The Scottish administration has set a welcome target for export growth, but they need to put much more flesh on the bones as to how this step change in performance will be achieved. It cannot solely to be left to the enterprise agencies. That is why we have called on Scottish ministers to provide pump-prime funding to help establish more direct air connections to key overseas business destinations and hubs, in order to make it easier for Scots firms to access new markets and service overseas customers more effectively.”

By contrast, the latest gross domestic product figures for the Scottish economy show that the country has been hit by a fourth consecutive quarter of stagnation, especially in the construction industry. In the third quarter of 2011, output from the sector fell by 1.2 per cent, leading Scottish Building Federation chief executive Michael Levack to comment that “we have now witnessed a full year of economic output figures where the Scottish construction sector has been on a consistent downward path.

“Looking at the corresponding employment statistics, this translates to the loss of 30,000 construction jobs – or more than 15 per cent of the workforce between September 2010 and September 2011. I can only reiterate my plea to ministers at Westminster and Holyrood to re-assess their spending priorities in favour of greater capital investment, to accelerate badly needed reforms to the planning and procurement systems to help get more projects off the ground and to further bolster support for apprenticeships and skills development in our industry.”

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