The State of Britain

The Scottish economy grows by 0.3%, the latest City Deal is announced and the viability of oil extraction in the North Sea is extended

Reading Time: 4 minutes

Unemployment in Scotland fell sharply by 9,000 to 94,000 between November and January; the drop of 0.3% took the overall rate down to 3.4% – a record low. At 2.9% and 5.2% the SW of England and Yorkshire & Humberside had the lowest and highest unemployment rate in the country respectively. The UK unemployment rate stands at 3.9%.

In March average earnings in the Scotland leapt to £628 per week. London had the highest average earnings of £846 whereas the North East had the lowest of £523. In the UK average earnings grew by 3.4% or by 1.5% after inflation.

Scotland’s property prices increased by 0.6% to an average of £149,036 during the month which trimmed the annual growth rate to 1.3%. In comparison UK prices dropped by 0.8% during March which cut the annual growth rate to 1.7%.

The Scottish economy grew by 0.3% in the final three months of 2018 according to the Scottish Government; compared to 0.2% for the UK as a whole. This suggests that for 2018 Scotland’s GDP grew by 1.4% compared to 2017, the same as the UK. Growth has been driven by the services and construction sectors, which both grew by 1.7% in 2018. Services – which makes up the bulk of Scotland’s economy – grew by 0.5% in the last three months of the year, while construction grew by 0.8% in the same period. However, the production sector shrank by 0.9% between October and December, with agriculture, forestry and fishing down by 1.1%. Some interesting analysis by PwC on Scotland’s economy since 1970 has found that if immigration and population growth had matched the rest of the UK, Scotland would have grown faster than everywhere else in the UK except London. Scottish ministers’ call for the right to operate their own immigration policy.

Are HMG’s City Deals having an economic impact? The latest, the Borderlands Growth Deal, has secured £85m over a 10-year period from the Scottish government, then, in his Spring Statement, Chancellor Philip Hammond, unveiled a UK government commitment of £260m. The proposed deal covers the council areas of Dumfries and Galloway, Scottish Borders, Northumberland, Cumbria and Carlisle City. Potential projects include the feasibility of taking the Borders Railway on to Carlisle, Carlisle Station Gateway, Chapelcross Energy Park near Annan, Berwick Theatre and Conference Centre and the Mountain Bike Innovation Centre in the Borders

Oil now and industrial action on some of BP’s North Sea platforms has been announced by the Unite trade union. The dispute centres on staff working three weeks on, three weeks off rotas. It follows separate strikes staged at four other sites operated by Petrofac and Aker for the oil giant Total. Forecasts of how much oil and gas could be produced by the UK offshore industry have been revised upwards. The industry regulator now believes 11.9bn barrels will be extracted by 2050, up from an estimate of 8bn four years ago. So far, 43bn barrels of oil or its gas equivalent have been extracted from UK waters. The new prediction is driven by lower production costs, technical advances and 30 new fields coming on stream. The regulator, reporting to the Treasury ahead of the Chancellor’s Spring Statement, said oil output last year was up 8.9 %, the highest UK oil production rate since 2011; gas production fell by 3%. The regulator’s forecast that capital expenditure would increase was reinforced by Britain’s richest man, Jim Ratcliffe, who announced £1bn worth of investments in the UK oil and chemical industries. Mr Ratcliffe’s Ineos will spend £500m on overhauling the Forties pipeline system – which transports 40% of the UK’s North Sea oil and gas – extending its life by at least 20 years. It will also build a £350m energy plant at his Grangemouth oil refinery. Neptune Energy also said it had agreed a final investment decision with partners BP and Japex to get the Seagull field to production by the end of 2021. Seagull is expected initially to produce about 50,000 barrels of oil and gas per day over its 10-year lifespan.

On other energy sectors, a decision on whether to ban fracking in Scotland has been delayed after the Scottish government said they will launch a further consultation process after the Easter break. The Scottish Government’s experiment with 1970s style state interventions was brought into sharp focus when BiFab – the recipient of an as yet underdetermined amount of state aid – is believed to have lost out on an order for offshore platforms to yards in Belgium, Spain and the UAE. The company has two mothballed fabrication yards in Fife. The Scottish Government took an equity stake in BiFab when it was rescued from collapse last year.

Fife is the largest beneficiary of a £50m Scottish Government fund to improve struggling town centres. Fife is receiving £4.3m. Aberdeenshire has been allocated £3.3m, with £3m going to Glasgow and £2.6m to Edinburgh. All 32 local authorities will receive a share of the cash, with councils deciding how to allocate the money in their areas.

On transport, the two freight ferries that serve the Northern Isles have been bought by the Scottish Government. The MV Helliar and MV Hildasay operate between Aberdeen, Kirkwall and Lerwick and will now join the Caledonian Maritime Assets Ltd fleet. Scotland’s railways will see Network Rail spend more than £4bn over the next five years to help prepare for a long term rise in passenger numbers. Some of the projects which were outlined include relieving overcrowding on the East Kilbride and Barrhead services and improvements to the Portobello junction in Edinburgh. Over the next five years the budget for track maintenance and renewal work will rise by 21% to ensure sufficient capacity for 100m passenger journeys a year. Network Rail will also begin consultation on a long-term development plan for Waverley Station in Edinburgh. A partnership of Network Rail and the City of Edinburgh Council will look at a mezzanine floor above existing platforms to create more space for passengers.

In the air, Austrian airline Laudamotion is to launch a direct service between Edinburgh and Vienna in the autumn. The airline, which operates as Lauda, will fly between the cities three times a week. Laudamotion was founded by Formula 1 racing legend Niki Lauda but became a fully-owned subsidiary of Ryanair in January.

The former Pinneys of Scotland plant in Annan could see 120 jobs at the site after the factory in Dumfries and Galloway was bought by food processing company Bhagat Holdings Limited. The company will invest £9m of capital in Annan unlocking a £1.7m grant. About half the jobs at a Scottish legal firm which has entered administration could be saved as its business is transferred to other companies. Morisons LLP employed more than 80 people; its Glasgow business will be taken over by Blackadders and its Edinburgh business by Thorntons. About 120 jobs are to be lost after rail maintenance company Gemini Rail Services in Springburn confirmed it is to close its depot which carries out service, maintenance, repair, overhaul and upgrades on trains for ScotRail.