Page last updated at 13:00 GMT, Wednesday, 22 October 2008 14:00 UK

Recession fears as economy slows

Shoppers in Edinburgh
Shops recorded their weakest sales performance for more than two years

The Scottish economy grew by 0.1% in the second quarter of this year, according to newly-released figures.

Statistics published by the Scottish Government said GDP had risen by that level between April and June - compared with a 0.3% rise in the first quarter.

Finance Secretary John Swinney said economic events around the world had already moved on considerably since the period covered by the statistics.

Economic expert Prof David Bell said Scotland may already be in recession.

The figures showed Scotland's economy faired marginally better than in the UK as a whole, where growth stalled for the same period.

The modest growth in GDP reflected an increase in service and production sectors but a 0.4% decline in the construction industry.

The data showed the financial sector - following a sharp 8.4% fall at the start of the year - fell again by 0.1%. Catering and hotels also dipped by 0.1%.

However, more recent economic evidence suggested Scotland could now be in a bleaker position.

We now need urgent measures to get the economy moving
John Swinney
Finance secretary

On Tuesday, CBI Scotland highlighted a sharp drop in orders for manufactured goods in the last three months.

And Scotland's high street shops have recorded their weakest sales performance for more than two years.

Figures from the Scottish Retail Consortium showed no growth on the high street last month compared with the same time last year.

Like-for-like sales in September showed no increase at all on the last year and non-food sales showed a fall, the Scottish Retail Consortium (SRC) said.

It was the worst result since March 2006 and showed weakening consumer confidence and the squeeze on household budgets, the consortium claimed.

Westminster calls

Mr Swinney said the GDP figures showed that Scotland's economy was still growing.

"But growth is clearly slowing which is concerning and undoubtedly reflects the impact of the global downturn on Scotland's real economy," he said.

"Though we have areas of real strengths - like a strong, skilled labour market and vibrant energy and engineering sectors - we now need urgent measures to get the economy moving."

He repeated calls on Westminster to allow access to unused money.

He added: "We want to see further and deep cuts in interest rates and lower tax on energy bills over this winter."

Prof Bell, of Stirling University, said the Monetary Policy Committee should have cut interest rates sooner and more gradually, suggesting that another 0.5% cut was probably needed.

David Lonsdale, of the Confederation of British Industry, said the Scottish Government could make changes to support the economy, including improvements to the planning system and ensuring greater private sector involvement in the delivery of public services.

Liz Cameron, chief executive of Scottish Chambers of Commerce, said: "These second quarter GDP figures tally with the messages we have been receiving from businesses right across Scotland and demonstrate that the pressures on the construction sector, which have been evident since early this year, are bringing our overall economic growth levels right down to the wire."

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