WIREDGOV

The Scottish economy continues to recover, but growth remains fragile according to a new report published today.

The State of the Economy report, published by the Scottish Government's Chief Economist Gary Gillespie, also highlights that:

• the escalation of the European sovereign debt crisis, coupled with the general slowdown in trade and investment in many of the world's key economies, has made the global recovery even more fragile than it was just six months ago
• over the last year, the UK economy has grown by much less than the rate of recovery normally expected in the aftermath of a deep recession
• while the Scottish economy continues to recover, like almost all other advanced economies, the pace of growth remains fragile
• as a small open economy, the strength of the Scottish recovery will depend critically on the pick-up in the global economy and our ability to increase our share of international investment and trade

Cabinet Secretary for Finance, Employment and Sustainable Growth John Swinney said:

"This report is yet another stark warning to the Chancellor. There is no doubt that UK economic growth will remain uncertain for the foreseeable future, as the economy continues its fragile recovery. While the Scottish labour market continues to outperform the UK as a whole - with lower unemployment, higher employment, and lower economic inactivity rates - we must ensure that growth is sustained. The improvement in the Scottish labour market over the past year has been encouraging - and we are taking action on youth unemployment and skills - but the report notes that further improvements will depend on the ability to boost output and generate new demand and employment opportunities.

"The Chancellor must heed the warnings and use his Autumn Statement to take urgent action to stimulate the economy and boost growth, improve access to finance and enhance economic security.

"Despite a 36 per cent real terms cut to our capital budget by Westminster, the Scottish Government has taken action to ensure that infrastructure investment actually goes up during the spending period, thanks to our £2.5 billion Non Profit Distributing programme and transferring resources from revenue to capital. Our overall capital programme is supporting around £9 billion spending over the next three years to deliver new schools, hospitals, houses, roads, water infrastructure, and high speed broadband across Scotland.

"But what we are hearing on the eve of the autumn statement is that the billion pounds specifically earmarked for the carbon capture competition - where Peterhead must surely be in the lead, following the UK Government's mistaken decision to scrap the Longannet project last month - is to be diverted to fund capital projects south of the Border. This surprise announcement raises more questions and concerns about the UK Government's motivations for scuppering the Longannet project. We need to know UK Ministers' exact intentions in regard to their plans for these funds, because information on the selection process for the next phase of the competition is seriously lacking. There is no doubt that progress on carbon capture in Scotland during this Westminster Parliament has a key role to play in driving forward economic recovery, as well as reducing greenhouse gas emissions.

"We also need the UK Government to ensure affordable access to finance for business and we need action to stimulate demand and enhance consumer confidence in the face of VAT rises and high fuel and food prices.

"We are working hard to create new economic opportunities, protect household income and employment, and with control over the key economic levers we could do so much more to strengthen recovery. I hope that the Chancellor acknowledges the tough times we all face, and takes real action."

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