Page last updated at 10:58 GMT, Wednesday, 15 July 2009 11:58 UK

Scotland feels the recession squeeze

By Douglas Fraser
Business and Economy Editor, BBC Scotland

It was PG Wodehouse who observed: "It is never difficult to distinguish between a Scotsman with a grievance and a ray of sunshine".

Shopper in Glasgow
Scottish consumers have been tightening the purse strings

If the grievance is this recession, then he had a point.

The BBC-commissioned ComRes poll suggests Scots are registering a specially grim streak of misery about their future prospects.

Set against the other parts of Britain, the data indicates Scotland is much more negative about the recession continuing and about prospects for personal finance. And true to stereotype, Scots are beaten only by the Northern Irish in responding to the downturn by trying to spend less.

Recessions used to hit Scotland particularly hard.

Unemployment started higher, and stayed that way, while Scotland has been relatively sluggish about returning to growth.

Growth fears

The Scottish National Party-controlled Scottish Government has also made it a priority to heat up the growth path between recessions, when, it says, the Scottish economy tends to under-perform.

Scotland has a higher dependence on public sector spending and employment than England

This recession is unlike its predecessors, in that the Scottish economy is behaving much more like the rest of the United Kingdom - including the novelty of negative equity on homes.

Its unemployment rate began the decline in a better position, just as its employment rate was also better than the British average. And while it has tracked the worsening of employment, it has remained slightly better placed.

The most recent Purchasing Managers Index, from Markit, suggests that Scotland is about to revisit the sluggish return to growth from the recession it has seen in the past. But business prospects were still in negative territory while the UK picture is nudging its way back into growth.

Better placed?

What marks out the Scottish economy as different is that many of the more traditional manufacturing industries have already gone in previous downturns.

There is no car manufacturing plant to be closed, nor a steelworks. The only two shipyards building hulls on the Clyde are doing so for the Royal Navy, offering job security for at least five years.

Snapped crane. Pic by Tracey King
Shipyard jobs are offering longer-term security

Much of the 1990s boom in electronics went east during the boom years, when the finance sector was there to soak up the redundancies.

That finance sector has played a prominent role in sparking the credit crunch, most notably with losses at the Royal Bank of Scotland and Halifax Bank of Scotland. The feared jobs cull has seen casualties, but not as bad as expected.

Not yet, anyway. And more than half of Scottish finance jobs are outside banking, with insurance and asset management continuing to prosper in Edinburgh and Glasgow.

Hot topics

Scotland has a higher dependence on public sector spending and employment than England.

That helps to explain why retail figures have shown Scottish shoppers spending more confidently than south of the Cheviots. But it also raises concerns about the country's exposure to the expected squeeze on government spending.

Diageo factory in Kilmarnock
Diageo's shake-up plans are set to trigger more job losses

Expect a political battle to heat up on that front between Westminster and the Holyrood Parliament in Edinburgh.

The other hot issue is the announcement by drinks giant Diageo to shed 700 jobs as it closes a whisky bottling plant in Kilmarnock, Ayrshire - home of the Johnnie Walker blend since 1820.

A fall in global demand for drams of Scotch is only one reason for that.

The company wants to restructure, to improve efficiency, investing in a Fife plant and bigger distilleries elsewhere.

And with two governments run by the two dominant political parties fighting over a marginal constituency, there is a political battle to be seen as champion of the Johnnie Walker workforce.



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