Talk of impending economic Armageddon in the UK intensified last week with reports suggesting activity in the important services sector has slowed considerably and the FTSE 100 index officially entering bear market territory.

But economists in Scotland say that the Scottish economy will be more resilient than that of the UK as whole.

The UK picture darkened, after retailer Marks & Spencer said like-for-like sales had fallen by 5.3% and after investors said they would not support an emergency £500m rights issue from housebuilder Taylor Wimpey, as well as the confirmation of thousands of job losses across the housebuilding and construction sectors.

Further bad news emerged on Thursday when the Chartered Institute of Purchasing & Supply said services sector activity has slumped to its lowest level since 9/11, suggesting that the UK may have already entered recession. There was also evidence from the Bank of England that the credit crisis is far from over.

But John McLaren, an economist at Glasgow University and a member of the Centre for Public Policy in the Regions, said that in economic downturns, Scotland performs relatively well.

“The trouble is that when economic growth returns, Scotland is once again likely to revert to being outperformed by the UK as a whole,” he said. “One reason for this is that the larger public sector in Scotland acts as an anchor. It’s a drag when things are going well, but it’s a benefit when things are going badly.”

Dougie Adams, economic adviser to the Ernst & Young Scottish Item Club, said: “Scotland was much less affected than the rest of the UK in the 1990s downturn. Between 1990 and 1992 the Scottish economy expanded by nearly 0.5%, compared with no growth in the UK. There is evidence to suggest that the current episode will be similar.”

He said Scotland is expected, for the first time in seven years, to match UK growth next year. But the difficulties and uncertainties facing the financial services sector may be a significant drag on the economy, while higher transport costs weigh relatively more heavily on Scotland than on the UK as a whole.

It therefore seems unlikely that the government of first minister Alex Salmond — who last October described Scotland’s economy as a “Celtic Lion” — will hit its target of matching UK growth by 2011.

The irony for Salmond is that the economy will almost certainly meet his target of outperforming the rest of the UK in the three years before that deadline. Presumably, when the relatively modest goal was set last autumn, he had no idea Scottish growth would exceed UK growth in 2008, 2009 and possibly also in 2010.

But after that, the consensus among economists is for a strong economic rebound in England, where 2011 growth could surge back to 2.6% or above.

Professor Brian Ashcroft of the Fraser of Allander Institute, said: “It is unlikely on present information that the Scottish government’s target of parity with UK growth by 2011 will be met.”

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