Recession avoided, but growth is anaemic – BBC News

Innis & Gunn has weathered some chilly economic weather in the two decades since it started brewing premium lager in Edinburgh.

The bank crash was a signal to keep away from too much debt, so higher interest rates in the past two years have not hit it as hard as some others.

But rising costs for households have meant subdued demand for nights out in its taprooms.

“Consumers are nervous. They’re cutting back on things they used to do, like going out twice a week,” says Dougal Gunn Sharp, noting there has been a consequent rise in off-trade demand for having one of his beers at home.

That uncertainty has added to his caution about opening more pubs. They are capital intensive, he says, and the prospect of borrowing to expand does not look that attractive.

The business, with its brewing now in Perthshire, is instead focussing on its core business, and looking to events to drive growth.

It already has a division seeking out such opportunities, having signed up as beer sponsor and provider of bars at the Royal Highland Show, the Royal Edinburgh Military Tattoo and concerts on Edinburgh Castle esplanade.

That focus on sticking to the core business, while avoiding the cost and risk of investment to expand, is a repeating feature of business in Scotland.

It is reflected in business surveys, in data published by the Scottish government and analysis by its chief economist.

Wednesday brought statistics that show Scotland has avoided recession this year, but growth remains weak. Stronger wind speeds and fewer strikes helped shape a mixed set of output figures.

The third quarter of the year saw growth of 0.4% in Scotland. The Scottish government data also shows the most recent month, September, saw slowing growth, to only 0.1%.

For economists, a recession would have required two consecutive quarters of contraction. April, May and June provided one such fall in output, by 0.3%. The third quarter helped reverse that.

But looking back further shows that 0.4% was the only growth we saw in 12 months.

Looking ahead, with prices still rising and borrowing costs remaining higher for longer, the forecasts continue to appear positive but poor for the Scottish and the wider UK economies.

Growth in September was at only 0.1%, following 0.3% for July and 0.2% for August. The services sector slowed as autumn began, while wind speeds picked up, raising output of wind turbines by 17%.

That has a growing influence on total output from the economy, also known as Gross Domestic Product.

The UK economic numbers this year have been affected by strikes, mainly in England. The third quarter saw the health service cut back on activity due to stoppages by staff, helping to explain why the UK as a whole saw zero growth and Scotland saw 0.4%.

Manufacturing was growing in Scotland, though it has not recovered to pre-pandemic levels. Construction has risen 2.5% in a year, but barely in the most recent quarter.

The services sector – more than three quarters of the economy – included relatively strong performance by the business services and finance sector, which represents 30% of Scotland’s economy.

The quarterly figures once again showed hotels and catering having a tougher time than others.

Those are the figures that reflect on the past year. The pattern worth noting from a longer perspective is that the rebound from pandemic and lockdown has stalled. Output has barely changed from the peak reached in 2019, ahead of Covid’s arrival.