Glencoe in the Scottish highlands © Julietphotography | Dreamstime.com

Scotland’s economy outperformed the UK as a whole in the second quarter of 2018, but concerns about low growth persist amid signs of increasing business concern about the impact of Brexit.

Scottish government data on Wednesday showed onshore gross domestic product grew 0.5 per cent quarter on quarter in the three months to July, slightly faster than the UK’s 0.4 per cent.

However, the Federation of Small Businesses (FSB) said its Scottish confidence index fell sharply in the third quarter and that a separate survey suggested more than half of companies believed they would be damaged if the UK left the EU without a Brexit deal or transition period.

Strathclyde university’s Fraser of Allander Institute on Thursday said Scotland faced “tough decisions” to position the economy for long-term success.

John McLaren, an independent economist, said Scotland’s annual growth rate had been about 1 per cent since 2010, just half that of the UK as a whole.

The recent relative outperformance of Scotland, in part the result of slowing UK growth, is a boost for the governing Scottish National party, which has been under fire over its economic policies.

“These are welcome figures which show that Scottish growth is both pulling ahead of the UK, and outperforming the official growth forecast,” said Derek Mackay, Scotland’s finance and economy secretary.

Growth in the second quarter was supported by 4.6 per cent expansion in production, which includes manufacturing, mining and energy supply. It was the fastest growth in production since 2014.

The Scottish Chambers of Commerce said it was “fantastic” to see the economy growing despite “uncertainty surrounding the broader trading environment”.

But David Mundell, the UK government’s Scotland secretary, warned against complacency. “Scotland’s economic performance is still struggling to close the gap with the UK economy which has opened up over recent years,” he said.

The SNP insists the pursuit of Brexit by Mr Mundell’s Conservative party poses the biggest threat to Scotland’s economy, saying a no-deal exit from the EU would be disastrous. 

An FSB survey in September found 56 per cent of Scottish businesses said a no-deal Brexit would affect them negatively. Almost a third of Scottish businesses said they planned to cut investment ahead of March 2019, when the UK is scheduled to leave the EU.

The FSB’s Scottish small business confidence index for the third quarter fell from +5.1 points to -13.2 points, a much sharper deterioration of sentiment than shown in its UK-wide equivalent, which dropped from +12.9 points to -1.7 points. 

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