Nicola Sturgeon has been accused of being “wholly distracted” by her bid for a new independence referendum amid warnings that Scotland is “halfway to recession” under the SNP, with its economy trailing behind the UK.
Damning figures revealed that the economy contracted by 0.2 per cent over the last quarter of 2016, while in the rest of the UK the economy grew by 0.7 per cent.
Over the whole of last year, Scottish GDP was up 0.4 per cent, compared to a figure of 1.8 per cent for the UK.
The Scottish Conservatives said that if the performance was mirrored in the first quarter of this year Scotland would officially enter recession.
Business leaders demanded urgent action from SNP ministers and called on them to ditch their high tax regime.
The economist Prof John McLaren said the performance must be remedied “as soon as possible”, but warned the outlook was bleak because of the uncertainty around Brexit and talk of a second independence vote.
The First Minister’s handling of the economy came under fire amid accusations that she had “dumped the day job” in favour of her independence campaign, and as a former SNP minister admitted a new vote would affect “more mundane issues”.
Kenny MacAskill, the former justice minister, said another vote would “slow” the wheels of government, as it did in 2014, while insisting the effect would be “as nothing” compared to the impact of Brexit.
Derek Mackay, Scotland’s finance minister, claimed the new economic figures reflected the “economic reality of Brexit”.
But Prof Graeme Roy, director of the Fraser of Allander Institute, said that with any Brexit uncertainty also affecting the rest of the UK, it was hard to argue that Scotland’s weaker performance could be blamed on the EU vote.
He added that while the downturn in the oil and gas sector was part of the explanation, all areas of manufacturing shrunk last year, with Scottish construction down by six per cent and manufacturing down by over seven per cent.
Liz Cameron, chief executive of the Scottish Chambers of Commerce, said that while Scotland's growth had been sluggish since the fall in oil prices in 2015, no sector in the economy was experiencing growth, with the service sector “flatlining”.
”This news must now bring an urgent change in policy from the Scottish Government in particular,” she said.
"The Scottish Parliament has just introduced a Budget in which medium and large businesses pay a higher rate of business rates than they would in England and where Scottish higher-rate taxpayers pay more tax than they would anywhere else in the UK.
"It is time for the Scottish Government to abandon this high tax agenda before it is too late as these policies risk driving investment out of Scotland.”
Lord Dunlop, the Scotland Office, said the simplest way to provide more certainty for people and businesses across Scotland would be to take a second independence referendum off the table.
Opposition parties were united in telling Ms Sturgeon to “get back to the day job”. Murdo Fraser, the Tory finance spokesman, said her government “must take responsibility for this mess”, adding: “She has made Scotland the highest-taxed part of the UK and created more instability and uncertainty with her threat of a second referendum. Now we see the real-life impact of her mismanagement.
"More than ever, Scotland needs a First Minister in charge who gets back to her desk, ends her obsession with a second referendum and focuses on her day job.”
The Liberal Democrats, meanwhile, said a majority of Scots now believe the First Minister is “wholly distracted by the issue of independence”.
The GMB union joined the chorus of criticism, saying sluggish growth north of the border could no longer be blamed just on Brexit and warned against a “sleepwalk back to recession”.
Mr Mackay, the finance minister, claimed Scotland’s economy faced “continued headwinds”, including the slump in oil and gas and weak global demand, while insisting that the foundations of the economy remained strong, with unemployment falling and early signs that the situation was improving for North Sea operators.
He added: “What is now quite clear is the economic reality of the Brexit vote. We have already seen significantly lower consumer confidence in Scotland since the vote last summer.
"Now we see that feeding through into our growth figures and all of this is before the UK actually leaves the EU.”