Over the summer Scotland’s economy moves up to fourth in the UK rankings, some concerns over the unemployment rate, and consultation on the replacement for EU structural funds begins

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The UK government has promised to replace EU funding to the regions with a new UK Shared Prosperity Fund. EU structural funds (regional development and social funds) have recycled £740m into Scottish projects between 2014-20.

Last month the Scottish Government launched a consultation on how these funds should be replaced after Brexit.

To complicate the issue, the EU has proposed that ‘transition region’ status should be extended to cover all regions with a GDP per head between 75-100 per cent of the EU average, compared to 75-90 per cent at present.

Seven additional UK sub-regions are likely to slip below the threshold of 100% EU average GDP per head, qualifying them for ‘transition region’ status. South West Scotland falls into this new category.

It is not clear how much extra funding South West Scotland would have received from the EU, but €50 per head over the next EU spending round is not an unreasonable assumption.

In Dundee, the Michelin site has received a £60m funding commitment to turn the former plant into an innovation centre focusing on sustainable mobility, clean transport and low carbon energy.

Last year the firm said that it would close the plant with the loss of all 845 jobs in 2020. More than 400 employees have found new jobs since Michelin announced the closure of the factory.

The £60m investment is supported by Michelin, Scottish Enterprise and Dundee City Council. It is not clear at this stage what the breakdown of the investment is or how much public money is involved.

On transport, figures released by Virgin Trains show more people travelling between London and Glasgow by rail rather than air. The record level was driven by a 6% year-on-year increase in the number of passengers travelling, c718,000, up from c244,000 a decade ago.

FirstGroup and Italian firm Trenitalia, are to take over the running of the route from December, replacing Virgin, which was barred from bidding. In the latest National Rail Passenger Survey, of the 25 operators in the country, Virgin was ranked second.

FirstGroup operates TransPennine Express, Virgin’s only competitor on most of the northern part of the West Coast mainline. The Competition and Markets Authority has raised concerns train ticket prices could rise under the new franchise.

The Authority said that on 21 routes, passengers would have little or no option but to choose a service run by FirstGroup. At Lockerbie, where there are no Scotrail services, passengers will have no choice. The Authority’s investigation into the new contract is ongoing.

The Stats

Following its first publication of quarterly GDP estimates for the regions in September, the ONS has now published its next estimates for the nine English regions and Wales, for the year to March 2019. GDP figures have been available for the UK since the 1940s, for Scotland since 2002 and Northern Ireland since 2013.

The Scottish figures are compiled by statisticians and economists in the Office of the Chief Economic Adviser of the Scottish Government.

The latest available comparable figures showed that Scotland’s economy grew by 1.4% compared with 1.5% in the year ended December 2018. This ranked the ‘region’ eighth (was previously seventh) out of the twelve UK ‘regions’.

London topped the table with growth of 4.2% with Yorkshire and The Humber bottom at -0.3%. Propelled by a drive to meet the original March 31st Brexit date, UK growth over the same period was 2.2%.

The ONS figures also showed that growth in Scotland accelerated in the quarter to March 2019. The economy grew by 0.5% in January to March 2019, following growth of 0.1% in October to December 2018.

In this period, food & drink and pharmaceutical & related industries accounted for more than half of the 0.5% growth.

Overall, output in the construction sector increased by 2.0%, output in the production sector increased by 1.8% and output in the services sector grew by 0.1%.

Estimates published by ESCoE last month for the year ended September 2019, a more recent period than the ONS figures, ranked Scotland fourth (previously sixth) with growth of 1.55%, which suggests the country has had a better summer relative to other parts of the UK.

Using this metric, UK growth was 1.45%. Growth in London (ranked first) was 2.32%, which compared with growth in the South West of England (bottom) at 0.41%

More data from the ONS showed that unemployment increased by 8,000 to 110,000 between July and September; the increase of 0.4% was the second highest in the UK and took the overall rate to 4.0%. Northern Ireland had the lowest rate of 2.5%, with the UK rate at 3.8%. The highest rate was 5.9% which was recorded in the North East.

The South West had the highest employment rate at 81.0% which compared with 74.4% in Scotland; the UK rate was 76.0%.

In September, average earnings in Scotland were up by £21 to £622 per week. London had the highest average earnings in the UK of £830. The lowest average earnings of £527 were recorded in Wales. In the UK overall, average earnings grew by 3.6% or by 1.8% after inflation.

Scotland’s average property price increased by 0.3% over the month to £155,029 which took the annual uplift to 2.4%. In comparison, UK prices fell by 0.2% to £234,370 during September, an annual growth rate of 1.3%.

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