Scottish economists and trade unions welcome post-Brexit stimulus package

Proposals include the acceleration of planned capital projects and establishment of a Business Information Service

SCOTTISH business bodies and trade unions have broadly welcomed the Scottish Government’s post-Brexit stimulus plan, which will see an additional £100m invested in the Scottish economy this financial year.

The Scottish Trades Union Congress (STUC) said it “strongly endorses” the First Minister Nicola Sturgeon’s package. Grahame Smith, general secretary of the STUC, added: “The Scottish economy, already weak due to the downturn in the oil and gas sector, risks falling into technical recession as a result of Brexit induced uncertainty. In this context it is important that the Scottish Government accelerates capital projects where feasible in order to support employment.”

The Fraser of Allander Institute, based at Strathclyde University, also expressed support for the measures, saying: “Forty per cent of respondents to our post-Brexit survey of Scottish businesses reported that the referendum result was likely to have a negative impact on their own investment plans. Today’s announcement of additional public investment will help counteract this, albeit at the margin.”

“With borrowing costs at a historic low, now is the time to invest to support jobs in the present and increase the economy’s capacity to grow sustainably.” Grahame Smith

The interventions come after First Minister Nicola Sturgeon announced the spending plans yesterday. Capital projects planned for the rest of the parliamentary term will be brought forward, with an additional £100m planned this financial year.

The plans were announced at the Golden Jubilee Hospital in Clydebank, where £5m of additional funding was announced to bring forward expansions of its elective centre from 2018-2019 to this financial year.

The details of what other projects will be accelerated, and which projects will receive extra funding, will be announced in due course. The Scottish Government said projects will be chosen “against a range of criteria including how quickly work can start, the number of jobs that will be supported or created, the likely impact on the supply chain and geographic spread”.

“The UK Government has not yet taken any meaningful action to alleviate uncertainty or to boost confidence.” Nicola Sturgeon

Also adding to the voices of support were the Scottish Chambers of Commerce: “This is a very welcome first step in the process of supporting businesses.  Businesses are looking for our governments in Edinburgh and London to invest in infrastructure and skills in order to support business at this crucial time.”

In addition to the accelerated capital projects and additional funding, the Scottish Government will establish a Business Information Service to act as a single point of contact for businesses seeking advice and information after the Brexit vote.

Sturgeon said: “It is important to act now to support and stimulate the economy. Scotland is and remains an attractive and stable place to do business - however, there is no doubt that the referendum outcome has created deep and widespread uncertainty, with the impact on jobs and investment already being felt.”

The first minister added that the response of the UK Government had been inadequate: “The UK Government has not yet taken any meaningful action to alleviate uncertainty or to boost confidence, and there are very real concerns that the damage to the economy and to jobs will be severe and long lasting.”

“There are already worries that the existing infrastructure programme may be building up dangerously high levels of revenue commitments.” Jim Cuthbert

The Fraser of Allander Institute echoed these comments, saying: “Given the current financial settlement the onus on providing a more significant fiscal stimulus – beyond the current financial year – rests with the UK Government.”

The STUC said: “With borrowing costs at a historic low, now is the time to invest to support jobs in the present and increase the economy’s capacity to grow sustainably in the future.”

Not everyone has given their unqualified backing to the proposals, however. Scottish economist Jim Cuthbert said: “There are already worries that the existing infrastructure programme may be building up dangerously high levels of revenue commitments.”

The Scottish Chambers of Commerce also added that such efforts should go hand in with reducing business costs: “We would also ask that the Scottish Government follows this up with action to reduce the cost base of businesses, including a reduction in the burden of business rates.”

The Fraser of Allander Institute also issued some notes of caution. “Accelerated implies a reduction in capital spending in future years. In our forecaset 2017 and 2018 are likely to be even more challenging than this year,” but added: “On balance, today’s announcement is a welcome step by the Scottish Government and shows a willingness to be flexible to the changing economic environment.”

Picture courtesy of: First Minister of Scotland

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