Scottish economy shrinks further

Metals and metal products were hard hit, falling by 8.5%

Scotland's economy was in a steeper decline from April to June than the rest of the UK, official figures show.

The second quarter saw the Scottish economy shrink by 0.8%, after a fall of 2.5% during the first quarter.

Gross domestic product (GDP) in the rest of the UK fell by 0.6% in the period between April and June.

The new figures revealed Scotland's economy shrunk for the fourth successive quarter, although the rate of decline was now slowing.

The statistics showed the Scottish economy shrank by 3.2% over the year to June - the same as the UK.

The government figures show output in the service sector fell by 0.4%, with declines in financial services, transport, storage and communications being partly offset by a slight growth in public administration and real estate.

Douglas Fraser BBC Scotland business editor We now have confirmation of an entire year in recession, and Scotland's downturn continues to follow a similar pattern to the rest of the UK. There is a suggestion from the second quarter figures that the Scottish economy may be coming out of recession at a more sluggish pace than the rest of Britain. That would fit with past experience. There are also hints of where to look for more green shoots of recovery: food, drink, engineering and textiles were back into modest growth. Even the real estate sector was looking up. Read Douglas Fraser's blog

In the manufacturing sector, metals and metal products were worst affected, falling by 8.5%, while chemicals and man-made fibres fell by 4.2%.

But food, drink, tobacco, engineering and textiles all chalked up gains.

Finance Secretary John Swinney said: "While Scotland continues to have higher employment and economic activity rates than the UK as a whole, today's figures confirm that there is no room for complacency.

"We must continue to do all we can to position Scotland's economy for recovery."

He said the figures showed the Scottish government was "absolutely right" to speed up capital spending to fight the recession.

Other figures released also suggested the worst of the recession may be over.

The CBI's latest quarterly industrial survey said Scotland's manufacturing sector saw a return to growth in output and orders in the three months to October.

And an "even stronger" increase was predicted over the next three months, it said.

Total new orders rose for the first time since April 2008, and the rate of growth was its fastest since July 2006.

This, said the CBI, reflected improving domestic orders while export orders were "broadly flat" after nine months of strong decline.

Both sets of figures were welcomed by CBI Scotland, although the business organisation warned the UK and Scottish governments against complacency as the recovery takes hold.

CBI Scotland assistant director David Lonsdale, said: "Nothing can be taken for granted however, underlining the need for government at all levels to continue to do all they can to aid businesses through the downturn, and to prepare Scotland to take full advantage of the recovery when it comes."

Mr Lonsdale added: "Every policy and spending decision needs to be tested against the benchmark of whether it aid the economic recovery."