FIFTEEN months on from the start of the credit crisis, three months on from the near collapse of Scotland's two biggest banks, and with Scotland's economy deteriorating by the day, pressure is growing on the administration to flesh out an action plan to address the deepening crisis of confidence.
The dilemma for the SNP Government is that it does not want to jeopardise measures already announced which are designed to improve economic performance in the medium to long term.
But that programme is increasingly looking like a wholly inadequ
ate response as the immediate slowdown intensifies. Among measures that business would like to see coming to the fore are action plans to help private enterprise, local authorities and individuals to cope with immediate pressures as the slowdown intensifies.
A summary six-point action plan announced last month is sorely in need of more detail as to what the administration specifically means to do. A fuller statement on the administration's response may come as early as this week.
Senior Scottish Government officials are closely monitoring the downturn and are increasingly concerned that the recession may have a greater impact on Scotland than on the UK overall. Specific worry points are financial and business services and the house building and construction industry.
I understand Scottish Enterprise is now putting together an action plan and that its field managers will be conducting one-to-one business reviews with more than 2,000 small and medium-sized firms to see where help can be given and in what form.
Work is also under way to ensure the maximum possible advantage is being taken of funds available from the European Investment Bank and other agencies.
Glasgow City Council has got off to a cracking start under the leadership of Steven Purcell. A meeting last week brought together more than 400 people with initiatives ranging from accelerated land sales through relaxation of planning rules to joint venture schemes with business.
While the main fiscal and monetary levers are for Westminster to pull, there is much that needs to be done at a micro level and on policy execution. The scale and pace of the recession and its implications for the economy have hit the Holyrood administration amidships. While there was something to be said for the First Minister's Council of Economic Advisers, set up in May of last year to review longer-term policy initiatives on a quarterly basis, it has been caught out by the onset of one of the worst recessions in 50 years.
The need now is for a much more activist action committee, a 'war Cabinet' chaired by the First Minister or Finance Minister John Swinney, to pull together work being undertaken by local authorities, Scottish Enterprise (SE), the Financial Services Advisory Group, the Scottish Council for Development and Industry and other bodies. One suggestion is for SE's International Advisory Council of senior Scots business figures overseas to be tapped for information and advice on how best to help the business sector.
Detailed monitoring of the impact of recession is being undertaken at St Andrew's House under chief economic adviser Dr Andrew Goudie. Although figures for Scotland's third quarter GDP performers are not due to be released until January, sufficient data has been amassed that points to a broad, across the board downturn in economic activity and, more worryingly, in business confidence for the period ahead.
Of particular concern has been the severity of revisions to previous estimates of UK economic performance and a sharp and substantial deterioration in the global economy. And it is the global dimension of the recession that is of acute concern for many Scots companies as we are an open economy dependent on exports and heavily exposed to global influences. The economists are also understood to be sceptical of the recent Bank of England Inflation Report projections suggesting a sharp recovery by the end of next year. Surveys such as that by Experian point to a downturn for Scotland next year more severe than that for the UK as a whole.
Particular attention is being paid to the Royal Bank of Scotland's PMI Scotland Report which contains results gathered from a panel of 600 companies. Its indicators of current activity, incoming orders and employment show record rates of contraction, with the service sector indicators lower than any previous reading in the survey's 11-year history.
The composite indices for both employment and business activity are both well below the average recorded for the UK as a whole. Within services, the record decline in activity is broad-based, with the three separately identified sectors of financial services, business services and travel, tourism and leisure all falling to series lows, the sharpest rate of contraction being in the financial services sector. Employment levels in services were reduced at a record pace during October. In manufacturing, firms pointed to sharp falls in new orders resulting from the impact of the worldwide financial turmoil compounded by reduced credit availability. October saw the steepest decline in staffing levels in manufacturing since late 2001.
Other business surveys alerting the administration to the severity of the recession in Scotland are the Lloyds TSB Business Monitor and the Scottish Engineering Quarterly Review.
It is against this grim backcloth that many are now questioning whether the administration and indeed the Scottish Parliament can maintain a façade of 'business as usual'. For the deeper the crisis becomes, the greater the danger that the institutions of devolution come to be seen as irrelevant to the problems and hardships being faced by people in Scotland.
The administration's 'Recovery Plan' includes the acceleration of £100m for affordable housing investment; support for Homecoming 2009 to boost tourism; 'intensifying work around energy efficiency and fuel poverty'; an additional £10m for a central heating programme and planning improvements. The list is padded out by references to the cut in business rates, re-organisation of the business enterprise network and a dedicated skills agency.
But there is very little that is new on this list or that is specifically designed in the wake of the recent deterioration in business confidence. There is little sign of new money. 'Energy efficiency' and a central heating programme do not really cut it as recession-countering measures. The skills agency is not new – it has just been hived off from Scottish Enterprise. And the same is true of the local enterprise companies.
So what is new? There is an understandable aversion within the SNP administration to the culture, endemic in the early years of devolution, of producing impressive-looking glossy executive reports that give the appearance of action but which resulted in little follow-through. However, there is a growing sense that, faced with the severity of this downturn, the administration not only needs a coherent and properly researched response, but that such a plan would also give focus to the administration's efforts and rally confidence.
Business desperately wants to see more action and certainly more evidence that the seriousness of the economic downturn is recognised at Holyrood and has moved sharply up the policy agenda. The danger is that the needs of Scottish businesses on the ground are left in the lurch and that the administration comes to look idle in the face of the most testing economic challenge in Scotland for decades.
A-Z of companies with Scottish interests that have went into administration in February after a period of poor trading.Ardana, listed biotech firm
What next? Company's assets are up for sale.
British Telecom
Announced about 10,000 job cuts last month and plans to trim the cost of its pension scheme after issuing a profit warning.
What next? More costs cut to rebuild profits.
Cemtron, Fife-based electronic manufacturing services
Went into administration and shed 41 jobs.
What next? Buyer being sought.
Daily Mail & General Trust
Announced last month that 400 employees had already left or were about to leave its Northcliffe regional newspaper division.
What next? More cuts. It is more than half way towards its job cuts target.
Freescale, a US-owned computer chip firm
Announced in October that it was axing 800 of its 1,000 jobs in East Kilbride.
What next? Plant to close in spring next year.
Gregor Shore, Scottish property developer
Forced into administration in October, putting 120 jobs at risk.
What next? Administrator plans to complete two developments that are underway in Edinburgh.
Idmos, dental technology
Fell into administration after period of poor trading.
What next? Administrator is seeking buyer.
MicroEmissive Displays, Edinburgh-based firm behind world's smallest TV screen.
Appointed an administrator this month after failing to find funding to support its business and being hit by the "severe slowdown".
What next? Administrator trying to save its 50 staff split between Scotland and Germany.
MoneyQuest UK, Glasgow-mortgage broker
Went into administration in July, but new company called Money Quest Mortgage Brokers was created from the ashes.
What next? Plans to expand into other areas of financial advice.
Mortgages plc, mortgage lender owned by Merrill Lynch
Axed majority of its 225 staff in Glasgow in June.
What next? Small back-office team will continue to manage loan books for other lenders.
Oakdene Homes, builder
Lost 37% of its value in October after becoming the first quoted house-builder to breach its debt covenants.
What next? Using a temporary bank lifeline as it looks for more funding.
Rolls-Royce, engine maker
Said this month that it plans to cut up to 2,000 jobs worldwide next year because of the downturn and delays to new Airbus and Boeing planes.
What next? Awaiting details
Shell, oil and gas
Said in April it is to cut 180 jobs in its North Sea operations in Aberdeen.
What next? Continues to employ more than 2,000 in Aberdeen.
Stem Cell Sciences, biotechnology
Said it was closing its HQ in the Scottish capital in favour of its Cambridge facilities.
What next? Relocation to save it £1m over two years, according to the firm.
Taylor Wimpey, the biggest builder in the UK
Is at serious risk of breaching its banking covenant agreements as refinancing has not been agreed.
What next? Will continue to look for refinancing.
Watson Construction, Scottish builder
Went into administration in June.
What next? Administrator is examining the company's finances.
Woolworths, retailer hit by the squeeze in consumer spending on the high street
What next? Its 815 stores could be sold for £1 to Hilco, a firm that specialises in taking over distressed companies.
