The State of Britain

Largely positive Scottish economics driven by bubble tea led exports and Transport Scotland looks at the option of rectifying one of Dr Beechings biggest mistakes

Reading Time: 4 minutes

Unemployment in Scotland decreased by 3,000 to 91,000 between February and April, a drop of 0.1% to 3.3%. The South West had the lowest rate in the UK at 2.7%; at 5.7% the North East had the highest. The UK unemployment rate stands at 3.8%.

Scottish average property prices increased by 0.7% to £150,825 during the month which meant annually prices grew by 1.6%. In comparison, UK prices increased by 0.7% to £228,903 during April which held the annual growth rate at 1.4%.

According to the latest figures from the ONS, Scots had the second highest disposable household income in the UK between 2016 and 2017. The UK average is £19,514 per household with only England higher than this at £19,988; Scots had £18,099 of income whilst the Northern Irish narrowly beat the Welsh with £15,813 versus £15,754. Nottingham had the UK’s lowest gross disposable household income (wages or benefits) of £12,445 with London borough Kensington and Chelsea recording household income over £60,000 and a growth rate of 4.9% from the previous year. With inflation over the period at 2.6% the growth in Scots incomes of 0.9% suggests a decrease in disposable income in real terms.

Total output from the Scottish economy grew at its fastest pace for two years in the first three months of 2019 according to the Scottish Government’s figures. GDP was up 0.5% and compared to the same quarter last year, Scotland’s GDP has grown by 1.4%, compared to UK growth of 1.8%. These figures differed from earlier figures from ESCoE which estimated growth in Scotland increased by 0.3% to 2.0% in the year to March 2019. Growth was led by manufacturers’ stockpiling goods prior to a March Brexit and construction but the dominant services sector saw little growth. More than half of the uplift was due to the food and drink sector, led by whisky and salmon, as well as petro-chemicals and pharmaceuticals.

This was evidenced by the latest HMRC figures which showed a 13% increase in the value of all exports driven by growth areas such as offshore oil and gas. Overall the value of goods made in Scotland and sold overseas increased to £32.8bn. Exports of goods from Scotland were up faster than any other part of the UK. The Scotch Whisky Association’s own figures showed more than 300m standard-sized bottles of Scotch were exported between January and March, driven by growth in the Asia-Pacific region and India and China. This partly reflects stockpiling by importers wishing to avoid any disruption from Brexit which was due to take place at the end of March.

More concerning was research by EY which found foreign investment in the Scottish economy dropped by nearly a fifth in 2018 with the number of R&D projects seeing the biggest decline. Scotland remained the second most attractive part of the UK after London, although the Midlands attracted the biggest projects. In 2017, 116 projects came into Scotland but last year this dropped to 94 and of this there were 13 fewer R&D projects. The leading inward investor was the USA; with six of the biggest nine projects. The largest single project was from Japan. Germany and Switzerland both accounted for 8% of the total, and Norway for 7%.

On jobs, Scotland looks set to gain following the announcement of restructuring plans at a finance sector blue chip. M&G Prudential is closing four English offices and uplifting its headcount in Scotland by 800 over the next six years. The firm is expanding its presence in Stirling and Edinburgh where staff from the English offices will be encouraged to relocate. In Edinburgh headcount will treble to 600, with 700 staff in Stirling.

In Glasgow, McQueen’s Dairies has bought the former Muller dairy in East Kilbride, which will allow it to increase its doorstep deliveries. The new facility, over 6.5 acres, is expected to open in spring 2020. The firm employs 400 with up to 100 new jobs now expected over the next two years. Also on dairy, Mackie’s has seen growth of more than 100% in East Asia after its product became a popular ingredient in bubble tea. The sweet drink, which is mixed with tapioca balls, is like an ice cream milkshake and is suited to the firm’s traditional ice cream which has no vanilla.

In Forfar textiles company Don and Low Ltd has blamed a shift in consumer taste towards hard floors from carpets on the loss of 55 jobs in its technical textiles division. The company employs about 400 people in the division and another 100 in the non-woven division.

On transport, Scotland-wide plans to abolish Air Passenger Duty (APD) were dropped in May but passengers flying to and from Inverness have been exempt from paying the tax since 1994. A long-haul flight, routed through London Heathrow or Amsterdam, could currently save £78 on a ticket by flying through Inverness instead of Aberdeen, 92 miles away. Given Inverness is one of the eight regions in Scotland which had labour productivity above the UK average in 2017 according to the ONS’s latest figures, an effective subsidy seems hard to justify.

Reopening the Port Road rail line between Dumfries to Stranraer railway is an option under consideration by Transport Scotland. Although Dumfries and Galloway has the lowest productivity ranking in Scotland at 30% below the UK average according to the ONS, funding for reinstating the 73 mile line seems fanciful given the 40 mile Borders Railway cost over £300m.