The closure of Grangemouth oil refinery was a big factor in Scotland’s economy shrinking, according to new data.
Figures published by the Scottish Government show a 0.4% decline in GDP growth over the three months leading to May – effectively wiping out the 0.4% rise recorded in the opening quarter.
During May, GDP shrank by 0.2%, following a modest 0.1% uptick the previous month.
Deputy First Minister Kate Forbes admitted that the latest monthly figure “demonstrates the cessation of oil refining at Grangemouth has contributed to a reduced output in the manufacturing sector”.
Kevin Brown, savings specialist at Scottish Friendly, said: “There is clear reason for concern in the Scottish economy as GDP lags the wider UK, -0.2% vs -0.1%. Although marginal, it emphasises the difficult situation Scottish households are facing.
While the closure of Grangemouth affected the data, Mr Brown it is a single, large and one-off incident that may have made numbers appear worse than might be more broadly apparent in the economy.
“No one wishes to see the loss of a key industrial pillar but hope should be placed on other sectors showing signs of buoyancy. Indeed, the biggest counter-effect to the closure of Grangemouth in May was Professional, Scientifical and Technical services, which contributed 0.2% to GDP.
“Looking ahead, there is an increasing possibility that interest rates could fall in the coming months thanks to wider UK economic challenges including slowing employment and stagnant GDP.”
The Monetary Policy Committee makes its latest decision on Thursday 7 August.
Surveys fairly buoyant
The Fraser of Allander Institute’s latest quarterly survey pointed to a “tentative” recovery in a challenging environment.
Sanjam Suri, Knowledge Exchange Fellow at the Institute, said: “The results in the second quarter marked a recovery of sorts after a very difficult first quarter.
“However, it’s clear that overall business confidence remains challenged.
“The tentative signs of recovery have thus far failed to make a dent in the economic outlook for the rest of the year. While most businesses have adjusted to changes in NICs, nearly 40 per cent of firms plan on making more adjustments, suggesting that the full impact of these changes are yet to materialise.”
Bank of Scotland’s monthly business barometer was more upbeat, revealing that business confidence in Scotland rose by nine points to 56% in July, exceeding the UK average.
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