Scotland faces ‘lot of pain’ as UK slides into recession
worst figures for over 25 years see the pound sink with bank shares
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The worst economic figures for more than a quarter of a century confirmed yesterday that Britain is in recession – and there were fears last night that the slump will be “deep and prolonged”.
Statistics due out next week are expected to confirm that Scotland has not escaped the global economic crisis.
Politicians in the north and north-east admit the outlook is bad and getting worse.
The UK economy shrank by a worse-than-expected 1.5% in the last three months, on top of a 0.6% fall in gross domestic product (GDP) in the three previous months, confirming the country is now officially in recession.
Chancellor Alistair Darling pleaded with the public to give his rescue measures time to work as shares in the UK’s 100 biggest companies struggled to stay above the 4,000 mark and Barclays’ stock fell for the ninth day in a row.
Lloyds and HSBC also fell, but shares in Royal Bank of Scotland, the victim of earlier runs, remained steady, albeit at a fraction of what they were worth two years ago.
And a furious row raged after Tory leader David Cameron said the country faces effective bankruptcy.
The value of the pound plunged again, hitting its lowest level against the US dollar since 1985 at 1.36.
Aberdeen North Labour MP Frank Doran warned that individuals face “a lot of pain”, but said the UK Government had put what he believed would prove to be effective measures in place, and once there were signs of the banks starting lending again confidence would return.
He labelled Mr Cameron’s remarks “outrageous”, and warned: “Scaremongering will make things worse.”
Caithness, Sutherland and Easter Ross MP John Thurso, the Liberal Democrats shadow business secretary, said: “These figures are truly appalling and serve to underline what everybody knows – that this is a very serious recession and the downturn is likely to be steep and long.
“But it does nobody any good for Mr Cameron to exaggerate our problems.
“The pound is probably undervalued and one day we will recover.”
SNP Treasury spokesman Stewart Hosie, MP for Dundee East, said: “The economic bad news has been relentless, and so confirmation that we are officially in recession is no surprise.”
He called on the Treasury to release £1billion “of Scotland’s resources” it is withholding to allow much-needed investments.
Mr Cameron defended his remarks, insisting it was “right” and “sensible” to warn about the huge build-up of government debt.
He added that it was vital to get government finances under control and develop a proper plan for regulating banks, because that would generate the confidence that is the key to recovery.
Mr Darling asked for time to demonstrate that his strategy is working. And on a visit to Glasgow, Prime Minister Gordon Brown said: “Britain and Scotland will come through this.”
Scottish Council for Development and Industry spokes-man Niall Stuart said: “With continuing bad news in business surveys, we have to expect an even larger fall in the first quarter of 2009 and an increasingly negative picture in employment.”
Mr Stuart said manufacturing had been hardest hit but every sector save agriculture was affected.
He called for a focus on restoring finance to the economy and investing in skills and retraining.
The Federation of Small Businesses (FSB) reported a dramatic rise in calls to its helpline from firms seeking advice on redundancies.
FSB’s Scottish policy convener Andy Willox called for “co-ordinated, responsible, intelligent economic action from government at all levels” in Scotland in support of small businesses.
He said: “The stakes are too high to get bogged down in blame-shifting and finger-pointing between Holyrood, Westminster and Scottish local authorities.”
Scottish Trades Union Congress general secretary Grahame Smith said: “Scotland is still struggling to deal with the persistent economic inactivity resulting from the recessions of the 1980s and 1990s and the disastrous labour market policies which accompanied them.
“It is absolutely essential that the same mistakes are not repeated.”
The fall in GDP is worse than the 1.2% decline most economists were expecting.
The last larger fall was between two quarters in 1980 after Labour’s Winter of Discontent, which led to the election of Margaret Thatcher’s Tory government.
Office of National Statistics figures also showed the UK economy shrunk 0.7% last year as a whole, the worst full-year figure since 1992.
Some economists disputed figures showing the retail sector did not have as bad a Christmas as everyone feared, claiming they were distorted by sales and the government cut in VAT.
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