The sky isn’t falling
Posted on 5th July 2017
For quite some time it appeared that the Scottish economy had only been grumbling along very slowly. In fact, it went backwards in Q4 of 2016, which led to considerable excitement as economists expressed their concerns that we might enter a technical recession if Q1 of 2017 continued this negative trend. With the publication of the growth figures for the first quarter of the year we know now that Scotland is not going into recession and in fact has rebounded strongly, posting 0.8% growth in the first three months of 2017.
The problem is that the media love a “good” bad news story. An official recession (or the prospect of one) certainly falls into that category. Consequently, for much of 2017 we’ve seen headlines that tell us we’re all going to hell in a handcart and, on some occasions, lovingly pour petrol on the flames. Too many publishers, making copious use of the Fraser of Allander (FoA) Institute’s Economic Commentaries, have been happy to generate the sort of negative headlines and stories that used to sell newspapers but now generate clicks.
It’s too easy to talk the economy down. That’s not to downplay any of the real problems we have just now, but if we rush around like Chicken Licken, screaming “the sky is falling,” there is a serious danger that all the negative prophecies become self-fulfilling.
Irrespective of whether the Scottish economy is in/out of recession, hidden within the general picture of malaise reported by the media the June FoA report suggests that, “the Scottish economy will pick-up in 2017.” Moreover, other studies by FoA, making use of a technique dubbed ‘nowcasts’, attempt to look at current economic data and create a more up-to-date picture of economic activity. These models, as reported early in July, suggested growth in Q1 2017 of c. 0.2% - 0.3% and a similar rate for Q2. However, they are drawn round with caveats and FoA cautions that this model “has tended to give a stronger estimate for Scottish growth than the official GDP series.” As we now know, this morning’s figure shows that this time it’s the other way round – the real figure is better than the ‘nowcast’ predicted! I know it’s hard to argue with economists (after all, they saw the 2008 crash coming, didn’t they?), but …
In reality, the difference between being “in recession” one quarter and “growing strongly” in the next hides many peaks and troughs. The first quarter of 2017 saw growth underpinned by services and production, while construction (with the huge infrastructure projects such as the Forth crossing coming to an end), declined. While most studies no longer ascribe all Scotland’s problems to the fall in the oil price or indeed to caution over Brexit, these factors played a considerable part in the prevailing mood over the last year. Yet the oil industry is starting to come out of the doldrums and, while it would be fatuous to think its boom days will return soon, there is a degree more optimism in the north-east than there has been for some time, with some business investment returning to Aberdeen.
It’s not just oil and gas: some other sectors are actually doing quite nicely thank you and our own area of IT, while still needing more investment in education at all levels, is an area where Scotland has a good record - and one that can be even better. Government has a part to play here, but so do businesses. We need to emphasise the great careers that can be had in computing and shout more loudly about success than failure.
In today’s Telegraph, there is a first-class article under the headline “Digital innovation can deliver antidote to uncertainty,” which extols the virtues of the digital economy and makes the vital point that, “According to Tech Nation, the (UK) digital economy generated 2.8 times faster job growth than the rest of the economy, with 1.56m jobs existing within it. We can do much more if we truly dedicate ourselves to digital, with a cross-government national strategy in place.”
Certainly, at Be-IT we are well aware of this faster job growth and the huge need for IT talent. The Markit surveys, which we report religiously every month, demonstrate conclusively that demand for IT professionals is growing and indeed in May growth in demand for permanent staff was at a record high in Scotland. While it may be a touch simplistic to hope that the doom-mongers can always be proven wrong, there is no doubt that success breeds success and engenders confidence – and confidence is the magic ingredient that powers the economy. We have all seen multi-talented sports teams fall apart due to lack of confidence, and, conversely, seen less talented teams over-achieve due to their camaraderie and confidence. Let’s make Scotland – not just in IT but in all sectors – an over-achieving economy, underpinned by a genuine confidence in our own abilities. I’m confident we can do it!
Gareth Biggerstaff, MD, Be-IT
Posted in News, Opinion
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