Grim Drama Parked

“Tomorrow’s GDP figures will confirm whether or not Scotland entered a second quarter of economic downturn in the first three months of 2017.” – Scottish Conservatives. 4th July 2017.

The quarterly Scottish GDP figures were released today after a long build up in a press anxious to see if Scotland was on, as the Express put it, the “BRINK OF RECESSION” (their emphasis).

The figures themselves rather put a misstep into their charge.


The headline figures are that in Q1 2017, Scotland’s economy grew by 0.8% which is up substantially on the -0.2% contraction seen in Q4 2016. This positive growth also means that the two successive quarters of negative growth which define a technical recession were not met.

The UK’s GDP growth over Q1 2017 was 0.2% though in my last blog post I put substantial attention onto the point that we should treat such comparisons with a great deal of care given the large regional inequalities within the UK. I’d very much like to see the GDP of the UK broken down across its regions (especially London) before commenting too much on it.

And before we all start patting ourselves on the back at avoiding our “predicted” recession, it’s worth actually diving into the numbers and seeing what they do and do not tell us about the Scottish economy.

The Headline


As said earlier, the quarterly GDP growth for Scotland was 0.8% which is the highest quarterly figure since Q1 2015 and breaks a trend running from then of a period of the economy bumping along and not doing much at all. Much of this drop was almost certainly caused by the collapse of the oil price late 2014 and the subsequent impact to the oil & gas industry. It’s likely that worse was averted only by the inversion of “Dutch Disease” whereby the drop in fuel costs helped support those non-oil jobs which are reliant on transport. In terms of annual growth, which will account for the rather dismal 2016 period, Scotland’s economy grew by 0.5%. It should be noted though that these are tiny rates of growth. If that annual rate was maintained it would take 138 years for the economy to double in size (for comparison, the UK economy doubled in size four times over the course of the 20th century).

GDP Per Person

It should be said that just simply measuring GDP isn’t particularly helpful unless you know how many people that GDP is shared between. It is perfectly possible that an economy can grow but due to an even sharper rise in population then each person may be individually poorer.


Here we see that this problem appears to have been averted in Scotland but observed across the UK as a whole although this only partially compensates for a growing gap in GDP/capita between Scotland and the UK over the past decade.


Of course, even this figure only has limited utility if we don’t know how that wealth is shared out across the whole population. Income and wealth inequality have rarely been higher than they are at present so it is very possible that this period of growth won’t filter out across all sectors, especially as the Scottish Government has very limited powers over tax and redistributive policies such as social security.

GDP by Sector

For the purposes of this report, the Scottish economy has been broken down into four broad sectors. Services (which make up 75% of the economy), Production (18%), Construction (6%) and Agriculture, Forestry and Fishing (1%).


GDP Sector2

Breaking down the total quarterly GDP growth into each sector and weighting for the size of each sector and we can see that a little under 75% of the growth figure comes from Production. Reading at the government’s statement on the figures, it looks very much like an upturn in the oil and gas industry combined with the resumption of production at the Dalzell steel plant appears to account for the bulk of the bump of the figures above the zero line. I hope we’re not champing at the bit now for a return to the fetishisation of the oil industry (especially not with those fracking arguments still ongoing). There are far more sustainable energy sources out there that we really should be looking at.

GDP Sector

On a slightly longer view I’d be rather concerned that the construction industry continues the decline started in the last quarter of 2015. Without fresh construction, it could be possible that today’s figures become just a blip and that no new growth is possible once existing slack is taken up again. It also won’t help the continued problems in sectors such as housing where a chronic shortage of new homes may be contributing to the problem of homelessness in Scotland and is certainly causing strain in the economy as people spend an ever greater proportion of their income just keeping a roof over their heads. There are certainly things that the Scottish Government could do now to help and it is becoming increasingly vital that we get a National Investment Bank set up and funded. Sure, Scotland is now the 2nd region outside of London for foreign direct investment but this can be read two ways. Either, Scotland is a dynamic country where people are willing to invest or Brexit has cut the price of UK companies by 15% and it’s now possible to strip our assets at bargain prices.

On GDP itself

Whilst we’re talking about all of this it’s worth remembering that the attention paid to GDP itself deserves a bit of scrutiny. Remember that, ultimately, it’s not a particularly good measure of the soundness of an economy. All it measures is the size, not the shape or the distribution of that economy. Nor does it measure the healthiness or education or happiness of a population (what matters it if we are wealthy but too stressed out to enjoy it?). The obsession with GDP growth in particular may well be misplaced in a world where there is increasing realisation that our finite resources are stretched to capacity. We, as a planet, can’t keep growing indefinitely. At some point, we’ll need to move to a more steady state economy which allows us to live here without the entire ecosystem collapsing (imagine a world where economic “success” is defined by a country’s ability to NOT grow and consume too much). We’re going to need new economic models and new ways of measuring them.

So I welcome today’s figures and, I’ll admit, I did get a moment of satisfaction this morning when the Tories were forced to walk back their direst of predictions (I’m sure that FMQs tomorrow will be quieter for it) but we must take the figures with a huge note of caution. There’s plenty to be done even before we get to the stuff we’re not yet allowed to do.

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2 thoughts on “Grim Drama Parked

  1. Pingback: 2017 at The Common Green | The Common Green

  2. Pingback: Nowhere Left To Grow | The Common Green

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