Business leaders demand change
Call to abandon high taxes as Scots economy shrinks
Scotland’s economy shrank 0.2% compared to the previous three months while the UK’s economy grew by 0.7%.
Scottish production contracted by 0.9% and construction by 0.8%, while services showed no change.
Finance Secretary Derek Mackay defended the government’s record, saying: “Scotland’s economy faces continued headwinds, such as the slowdown in the oil and gas sector and weak global demand.
“Despite these challenges, the foundations of our economy are strong with growth in 2016, unemployment falling and early signs that the situation is improving for North Sea operators.”
But the business community and opposition MSPs were less than impressed.
Liz Cameron, chief executive of Scottish Chambers of Commerce, said Scotland’s economy was now on “red alert” and the Holyrood government must “abandon the high tax agenda”.
Warning that current policies risk driving investment out of Scotland, she said: “The news that Scotland’s economy is contracting at a time when the overall UK economy is growing healthily must ring alarm bells for both the Scottish and UK Governments.
“While Scotland’s growth has been sluggish since the fall in oil prices in 2015, the evidence now shows that no sector in the Scottish economy is experiencing growth, with production and construction falling and our service sector flatlining.
“This news must now bring an urgent change in policy from the Scottish Government in particular.
“The Scottish Parliament has just introduced a Budget in which medium and large businesses pay a higher rate of business rates than they would in England and where Scottish higher rate taxpayers pay more tax than they would anywhere else in the UK.
“The Scottish Government is also planning higher planning fees, a potential new infrastructure levy and the returns from the Apprenticeship Levy are also less direct than for businesses in England. These additional costs for Scottish businesses are only now being felt, so could result in an even less competitive business environment in Scotland this year.”
Ms Cameron added: “It is time for the Scottish Government to abandon this high tax agenda before it is too late, as these policies risk driving investment out of Scotland.
“Instead, it must focus its attention on supporting businesses to grow and to create the jobs and wealth our economy needs. Urgent action is needed to reverse the additional costs that businesses are incurring in Scotland.
“The urgency of the Scottish Government’s enterprise and skills review and the agenda for change that this signals in terms of government policy is also now paramount, enabling a reinvigoration of how Scotland’s public and private sectors can work together in mutual support.
“These may be one quarter’s figures, but they are illustrative of a trend which has existed throughout 2015 and 2016. Scotland’s economy is in red alert and must be the number one priority for both the Scottish and UK Governments.”
Andy Willox, FSB’s Scottish policy convener, said: “Today’s anaemic growth figures shows there’s much to do to nurse the Scottish economy back to health.
“If Scotland is to avoid recession, we need to see action from governments in Edinburgh and London to boost local firms. Scottish Government and UK Government Ministers need to avoid fixating on inward investment – and put real effort into developing genuinely resilient local economies.”
Hugh Aitken, CBI Scotland director, said: “Businesses are facing increased uncertainty and rising cost pressures, which has resulted in a number of recent closures and potential job cuts affecting hundreds of people across Scotland.
“The Scottish Government should therefore prioritise fast-tracking business rate reform, improving education attainment and setting a competitive tax regime to ensure Scotland is an attractive place to do business.”
“Nicola Sturgeon’s Scottish Government must take responsibility for this mess.
“She has made Scotland the highest-taxed part of the UK and created more instability and uncertainty with her threat of a second referendum.
“Now we see the real-life impact of her mismanagement.
“These figures also smash the SNP’s claim that Brexit is to blame for a slowdown.
“If that was the case, why is the rest of the UK powering ahead, while Scotland comes to a standstill?”
Scottish Labour’s economy spokeswoman Jackie Baillie, said: “With Scotland’s economy flatlining and Brexit creating unprecedented levels of uncertainty, it is time the SNP government in Edinburgh started taking some responsibility for its failures and acted to address them.
“The SNP should take a second referendum off the table and get back to governing the country.”
> New data from Barclays shows that basic costs for small businesses across the UK rose by 3.2% last year. Scotland’s business costs were in line with the UK average.