Scottish Agenda: Omens look good for Salmond’s pet lion

By Ian Fraser

Published: The Sunday Times

Date: October 21st, 2007

Alex Salmond Photo: BBC

ALEX SALMOND is not without ambition. The Linlithgow-born cheeky chappy declared his desire to transform Scotland into a “Celtic Lion” on a recent visit to the United States.

Salmond believes that he, his cabinet colleague John Swinney, and his council of economic advisers, led by former Royal Bank of Scotland chairman Sir George Mathewson, can together summon up this fearsome beast.

They hope the big cat will come roaring onto the global economic stage, terrifying lesser European species and hopefully, outrunning its increasingly mangy-looking cousin, the Celtic Tiger o’er the water.

Speaking at the prestigious Council on Foreign Relations in New York on October 12, the first minister also signalled his ambition that Scotland’s economic growth rate should at least match the UK level, which it has consistently lagged behind for decades, by 2011.

He believes that this can be achieved partly by learning from the example of other fast-growth small economies such as Norway, Iceland and Ireland.

Admittedly these are independent countries with some access to their own macroeconomic and fiscal levers of power, but to me it does not seem too ambitious a target. However, given the “Scottish cringe”, there was some degree of skepticism, and even scorn, in sections of the Scottish press about whether the target might be achieved.

In the short term at least, Salmond and his band of nationalists can take some comfort from the latest forecast from the Ernst & Young Item Club, due to be published tomorrow.

While, for the UK as a whole, the Item Club is predicting a sharp slowdown in growth next year, largely because of the fallout from the current credit crunch, the club’s Scottish arm is predicting the effects will be less keenly felt north of the border.

The Item Club forecast warns that UK growth will be dented by the credit crunch, largely because this will make it harder and more expensive for individuals and companies to borrow money, next year. Item has made a sharp downward revision to its forecast for 2008 growth, from 2.5% to 2.1%.

Speaking about the credit crunch, Peter Spenser, the club’s economic adviser, said: “One thing is certain, this is a very timely tightening, targeting parts of the financial sector that were growing too fast and were too dependent on cheap credit. Having to reverse gear may not be such a bad thing.”

He foresees a marked slowdown in the frothier and more debt-fuelled aspects of the City – hedge funds. private equity, aspects of investment banking and corporate finance. Luckily for Scotland, its financial services sector – which has been described as the engine of the country’s economic growth – is much less heavily dependent on these areas of activity.

Dougie Adams, the economic adviser to the E&Y Scottish Item Club, said: “While growth in the key financial services sector will inevitably weaken as the banks behave more conservatively, Scotland has little exposure to the parts of the sector that are feeling the most pain.

“Scotland’s employment performance remains strong and there is as yet little clear evidence of a slowdown in the shops.” If the Item Club is right – and it does use the Treasury model when preparing its forecasts – Salmond’s goal of exceeding UK economic growth might be achieved sooner than he ever imagined.

Career opportunity

Former Tory cabinet minister Lord Tebbit’s advice to those who found themselves out of work was simply “get on your bike”.

I suspect the advice would not be welcome at the fourth International Symposium on Career Development and Public Policy. This will bring careers guidance experts from 27 countries to the Highland resort of Aviemore this week. The event, organized by a steering group chaired by Careers Scotland, is timely. The government-commissioned Leitch report stressed the importance of increasing Britain’s skills base to ensure global competitiveness.

The symposium has been flagged up as providing Scotland and the UK with an opportunity to convey their achievements in the world of careers guidance to delegates from as far afield as Botswana – and also learn from other countries – experiences.

I have long seen the careers advice industry as a somewhat woolly niche of the public sector. However, on reflection, there may be clear advantages for business in having a better careers advice framework. So let’s hope the transfer of best practice works in serendipitous ways.

Melrose aims high

It’s good to see a company seeking to reinject some dynamism into the high-yield bond market. Edinburgh-based oil and gas explorer Melrose Resources plans to issue a €250m bond and will start a roadshow tomorrow. It will be the first high-yield euro non-financial issue since the summer’s credit crunch kicked in.

Proceeds from the bond, due in 2015, will be used to refinance Melrose’s existing indebtedness and to provide additional working capital for its ambitious exploration programme in Egypt.

That is likely to please HBOS, which remains a significant lender to the exploration company, and may wish to limit its exposure.

This article was first published in The Sunday Times Scotland October 21st, 2007 issue. To visit The Sunday Times’ website please click here

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