Scottish economy contracts 0.2% in Q4

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Scotland’s economy contracted by 0.2 per cent at the end of 2016, defying a broader expansion in the UK in figures that will do nothing to bolster the country’s case for independence.

Official stats from the Scottish government show overall GDP growth in 2016 was 0.4 per cent, compared to a 1.8 per cent expansion in the UK as a whole. Quarterly growth in the UK meanwhile was 0.7 per cent in the last three months of the year.

The figures come as the ruling Scottish Nationalist Party has announced a second referendum on the country’s independence following the UK’s Brexit vote.

Scots voted in favour of remaining in the EU by a majority of 62 per cent against 38 per cent, leading Nicola Strugeon, Scotland’s first minister, to demand the devolved region remain part of the bloc’s single market.

The quarterly growth slump was driven by poor performance in the services sector, where output was flat, while construction shrunk 0.8 per cent and overall industrial production declined by 0.9 per cent.

Hugh Aitken, Scotland director at the Confederation of British Industry, said the stagnant service sector was “a real worry given its importance to the Scottish economy”.

The broader UK economy has held up well in the aftermath of the Brexit vote last July, with growth matching its pre-referendum pace and consumers continuing to spend.

Despite the attention generated by the prospect of another independence referendum in two years, Mr Aitken said the government should “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.”

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