The State of Britain

Scottish unemployment at a record low, whisky galore and the ‘Carstairs Kiss’

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Unemployment in Scotland dropped by 8,000 to 93,000 between December and February; a decrease of 0.3% to 3.3%. The SW of England had the lowest unemployment rate in the country at 2.6% and the NE of England had the highest at 5.6%. The national unemployment rate stands at 3.9% and UK average earnings grew by 3.5% or by 1.6% after inflation. Scotland’s unemployment rate is at a new record low and the UK rate is now lower than at any time since the end of 1975.

Scottish average property prices fell sharply by 3.1% to £145,762 during the month – the biggest fall in the UK – which meant prices dropped by 0.2% over the year. In comparison, UK prices dropped by 0.8% to £226,234 during April which cut the annual growth rate to 0.6%.

Official figures from Scotland’s chief statistician showed the economy grew by 1.3% in 2018 which compares with the UK rate of 1.4%. Growth in services was 0.5% and construction 0.4% but production fell by 0.8%

The best way to deliver infrastructure projects was in focus this month as the
The Scottish Futures Trust (‘SFT’) celebrated its tenth anniversary. Originally established by the incoming SNP Government in 2007 as an alternative to PFI – by encouraging greater use of public bonds – it has since more or less abandoned this and evolved into a type of guardian of the public purse, targeting better procurement and the more efficient use of public assets across the Scottish public sector. The Scottish government tasks the SFT with saving between £100m and £150m each year which, on its own figures, it achieves, with for example £139m saved in 2018, outweighing its c£10m operating budget. Sharing project risk with the private sector is sensible as long as the rewards are shared too. Few would argue that the £1.35bn Queensferry Crossing project was not a success in terms of public procurement but disputes with other contractors over paying the cost over-runs on the Crossing coupled with over-runs on the Aberdeen Bypass project has cooled Galliford Try’s appetite for fixed-price contracts . With Carillion gone and Interserve forced to refinance, the private sector must continue to be properly compensated if it is to take on construction risk, otherwise who is going to deliver infrastructure, the state does not have the skills to directly employ the 130,000 in the sector.

Galliford Try has said about 350 jobs could be lost across the UK with most in Scotland. The restructuring will see the Infrastructure business unit in Scotland closed following losses on the two major infrastructure projects mentioned above. The firm remains committed to its existing operations for Morrison Construction in Scotland.

More positively, Scotland continues to benefit from Northshoring, after accountancy firm KPMG announced plans to create up to 400 jobs over the next three years in Glasgow. The firm has already increased headcount by 50 at its managed services hub with roles including data gatherers, analysts and managers. The hub will be based alongside KPMG’s tax centre of excellence in St Vincent Street, where the firm has taken up an additional two floors. KPMG was offered a £1.7m grant to help create the Tax Centre of Excellence in 2013.

The Scotch whisky industry provides £3.8bn in direct income to Scotland according to the Scotch Whisky Association, which claims the sector produces £210,505 of income (or GVA) per employee. Comparatively, the industry is more productive than the energy sector at £173,511 per head, life sciences at £93,735 per head, and creative industries at £60,712 per head. The research is based on work by the Centre for Economic and Business Research which found Scotch whisky contributed 21% to the value of all UK food and drink exports, worth £4.7bn, and that it supports 42,000 jobs, including 10,500 directly employed in Scotland and 7,000 in rural areas plus UK spirits excise duty receipts accounted for £3.8bn.

Given the above, investment in the sector continues to be robust. Diageo has submitted plans to update visitor facilities at two distilleries – Cardhu in Speyside and Clynelish in Sutherland – in the north of Scotland. The move is part of a £150m tourism project which will be link a new Johnnie Walker visitor attraction in Edinburgh to four distilleries. Other visitor distilleries, including Lagavulin, Talisker, Glen Ord, Oban, Dalwhinnie, Blair Athol, Cragganmore and Royal Lochnagar, will also see investment. Work has already started to bring Brora back into production as part of a separate £35m investment programme that will also revive distilling at Port Ellen Distillery on Islay.

In Islay, the Bruichladdich distillery – the biggest private sector employer on the island – will run entirely on renewable energy within the next five years, as part of a £20m investment. Also on the island, the first new distillery for nearly 15 years has opened. The Ardnahoe Distillery was built with a £12m investment from Scottish family-owned Hunter Laing & Company. It includes a visitor centre with retail facilities, a whisky bar and a restaurant and hopes to attract 20,000 visitors a year. Ardonahoe brings the number of working distilleries on Islay to nine.

On state interventions this month, a smart energy scheme is being trialled on Orkney. The scheme will use domestic batteries and electric vehicles to balance the local power network; meeting supply with demand. Backed by £14.3m of UK government funding, Orkney has been chosen because of its high take-up of micro-generation; 10% of homes create their own electricity compared with a UK average of 2.8%, this equates to about 2kW of renewable energy capacity per property.

Four towns across Scotland are to share more than £4m towards their regeneration. Hawick, Mauchline, Inverkeithing and Lochgilphead will benefit from Historic Environment Scotland’s conservation area regeneration scheme (CARS).

In the air, the world’s largest commercial passenger aircraft has begun regular services between Glasgow and Dubai. More than £8m has been spent on engineering work to prepare Glasgow for the arrival of the Airbus A380 double-decker jet.

On the railways, the new £150m fleet of Caledonian Sleeper trains has been unveiled. The 75 new carriages will offer en-suite double rooms for the first time. Initially there will be 484 rooms available on the Lowlander route between London and Glasgow/Edinburgh followed by the Highlander route between London and Aberdeen, Inverness and Fort William. The fleet features 40 Sleeper carriages, each with six showers, 14 Accessible carriages, each with two showers and 347 toilets. Crucially new engineering technology will stop the Carstairs ‘bump in the night’ – the shunt when two sections of the train were coupled together. Operator Serco’s Ryan Flaherty said: ‘On the current train the coaches have to ‘kick’ together to make the contact, but going forward it’s ‘kissing’.