Scottish economy confidence votes highlight false narrative

The Herald Scotland

7 hours ago

Scotland was one of six of the 12 UK nations and regions to record expansion last month. Its growth was driven by 'strong expansion' in the services sector, with manufacturing output falling again.
The business activity index for Scotland - a seasonally adjusted measure of the month-on-month change in the combined output of the manufacturing and services sectors - rose from 47.4 in April to 50.5 in May on a seasonally adjusted basis to indicate renewed growth.
This marked the first increase in output on this measure for six months, and Scotland was placed fifth out of 12 in the business activity index league table of the UK nations and regions.
Meanwhile, Scotland was the only part of the UK to see growth in private sector employment in May.
Sebastian Burnside, chief economist at Royal Bank of Scotland, said: "Following a near-universal decline in output across the 12 monitored UK regions and nations in April, Scotland was one of six areas to experience an upturn in business activity during May.'
He added: 'The Scottish labour market demonstrated resilience, with firms adding to their workforce numbers for the first time in six months. Notably, it was the only tracked area to report an increase in employment.'
While we should not get carried away with Scotland's performance in the growth tracker survey, there are undoubtedly some positives.
Also heartening were the latest figures on financial services foreign direct investment for Scotland published by accountancy firm EY on Monday.
These showed Scotland was again second only to London as a destination for financial services foreign direct investment (FDI) in the UK last year, achieving a decade-high for the number of projects won.
Scotland attracted 11 financial services FDI projects in 2024, up from nine in the previous year, the EY figures revealed.
This advance was achieved in spite of a sharp fall in the overall number of financial services FDI projects won by the UK last year, which makes it all the more impressive.
The UK attracted 73 such projects last year, down from 108 in 2023.
EY's figures show that Edinburgh, with the six financial services FDI projects it attracted last year, was the joint-top city outside London for such wins, alongside Manchester.
London attracted 39 financial services FDI projects in 2024.
The US continues to be the top source of financial services inward investment for Scotland, accounting for five such projects in 2024.
EY noted the US has been the source of 38 financial services FDI projects for Scotland over the last decade.
My column in The Herald on Wednesday on the EY figures observed: 'It was heartening indeed to hear Scotland not only managed to retain its impressive place as second only to London as a destination in the UK for financial services foreign direct investment last year but also bucked a declining trend.
'That said, it is difficult to shake the impression that not everyone in Scotland will be delighted at this news. There seem to be many who would rather it was all going horribly wrong, so they could point their fingers and declare, for political reasons, that Scotland is some kind of basket case and that it is all the SNP's fault.'
Glasgow earlier this year climbed further in a closely watched league table of global financial centres.
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The city rose by five places to 32nd spot in the latest twice-yearly Z/Yen Global Financial Centres Index, published in March. Back in September 2023, Glasgow was in 51st spot.
Edinburgh's position was, at 29th in the latest rankings, unchanged from September 2024 when it climbed to its current position from 33rd but its overall score improved.
Sue Dawe, EY's Scotland managing partner for financial services, said of the accountancy firm's latest FDI figures for this sector: 'We continue to see Scotland perform well in attracting financial services FDI projects. In 2024, we saw almost as many projects expanding existing operations as we did brand new projects - which is a great indication that these companies view Scotland as a viable proposition to continue investing in.'
It is most encouraging to see Scotland continuing to perform well in attracting financial services inward investment in what is clearly a fiercely competitive international arena.
And Ms Dawe is right to highlight as a positive the fact that many of the successes last year were around further investment by overseas players which have clearly found Scotland an attractive place to set up operations.
The latest strong numbers for financial services FDI for Scotland are testament to the hard work of the sector, universities and other educational institutions, and government agency Scottish Enterprise's Scottish Development International arm.
Ms Dawe noted: 'Financial services isn't simply one of Scotland's growth sectors - it's the growth sector that enables other growth sectors; so, if we get this right and continue to be the most attractive place to establish financial services operations outside London, the Scottish economy as a whole will benefit.'
Long may Scotland's success on the inward investment front, in financial services and across myriad sectors, continue.
Votes of confidence in Scotland from overseas companies highlight the huge extent to which some of the downbeat and often politically motivated narrative around the nation and its economy is wide of the mark.