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Last Updated: Wednesday, 15 March 2006, 13:20 GMT
Scottish growth 'level' with UK
Construction workers
The growth in construction has boosted the Scottish economy
One of Scotland's leading economic think-tanks believes Scottish economic growth is now level with the UK.

The Fraser of Allander Institute said the Scottish economy had been improving at the same time as the UK economy was slowing down.

However, it also warned that the glory days of Scotland's electronics industry had now passed.

Latest figures show that unemployment in Scotland has fallen to its lowest level since records began.

The institute, which is based at Strathclyde University, said recent quarterly growth in Scotland was slightly better then the economy's quarterly average of 0.45% since 1998.

It is highly likely that Scotland will lose any remaining low-value, high-volume activity in electronics
Fraser of Allander Institute

The labour market was also shown to be reasonably healthy with 30,000 jobs expected to be added this year.

The institute said this could be attributed to growth in Scottish services and the construction sector, which grew by 0.8% and 1.4% respectively in the third quarter of 2005.

However, it pointed out that overall manufacturing north of the border continued to be weaker than in the rest of the UK, which had led to major job cuts.

Electronics output, which accounts for about 20% of value added in manufacturing, fell by more than 8% in the year to the third quarter in 2005 and was accompanied by announcements of about 1,500 job losses.

The report said: "When compared to the UK, Scottish electronics has contracted to almost half since its last production peak in the third quarter of 2000, a reduction that is almost twice as great as the fall in UK electronics production.

Outperforming UK

"Our hypothesis is that Scottish electronics suffered disproportionately because of the concentration of high-volume, low-margin commodity production here.

"The future for electronics and production would appear to lie in companies moving up the value chain to produce high value products requiring complex manufacturing processes.

"It is highly likely that Scotland will lose any remaining low-value, high-volume activity in electronics."

But the commentary also noted that the growth of Scottish output was holding up.

Motorola sign
Motorola was one of the companies which closed Scottish plants

The institute also found that chemicals, mechanical engineering, transport equipment and paper printing and publishing all outperformed their UK counterparts over last year with growth of about 2.9% in Scotland compared to a decline of 3.1% across the UK.

Unemployment is also forecast to remain broadly stable, with the International Labour Organisation (ILO) rate predicted to fall slightly from 5.4% in 2006 to 5.3% in 2007 and 5.2% in 2008.

Latest figures show that unemployment in Scotland fell by 12,000 in the quarter which ended in January.

Figures from the Office for National Statistics show that the number of people out of work decreased by 12,000 in the three months to January 2006 to 133,000.

By contrast, the number of Britons out of work and claiming benefits rose by 14,600, the biggest jump since December 1992 when the UK was still emerging from recession.

The Scottish unemployment rate stood at 5.1% in January, marginally above the UK but lower than most other EU countries.

The employment rate in Scotland among those of working age rose by 0.2% over the year to 75.3%.

The figure remains above the UK average and most other EU countries, the ONS said.

Scotland Office minister David Cairns said: "This month's figures show that the Scottish labour market continues to build on its record performance."

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