UNEMPLOYMENT in Scotland fell 18,000 in the three months to May but the sharp dip failed to mask bleaker news for the country's economic prospects.

Separate official showed showed growth stalling, prompting warnings from business leaders that the economy was underperforming.

Experts said weaknesses had been exposed by the end of dramatic but short-lived construction boom fuelled by major infrastructure projects including the new Forth crossing and Borders rail link.

The jobless total in Scotland fell to 155,000, Office for National Statistics figures showed, though at 5.5 per cent the unemployment rate was above the UK's 4.9 per cent.

The number of people in work rose by 17,000 over the same period to stand at just over 2.6million.

However, the encouraging jobs news was balanced by separate official data showing the Scottish economy failed to grow in the first quarter of the year.

Gross domestic product, a measure of the size of the economy, stalled in Scotland while growing by 0.5 per cent across the UK.

The figures confirmed the Scottish economy has been growing more slowly than the rest of the UK over the past year.

They revealed a slender 0.6 per cent increase over the past four quarters, compared with growth of 1.7 per cent across the UK.

Commenting on the two sets of figures, Andy Willox, the Federation of Small Business's Scottish policy convenor, said: "These pre-referendum figures demonstrate that the Scottish economy was underperforming before the vote.

"While a decline in unemployment is good news, there's a worrying gap between the UK and Scottish jobless rates.

"Business surveys and feedback suggest that some investment plans and deals have been put on hold as a consequence of recent economic and political turbulence."

In another analysis of the figures, economist John McLaren said the prospects for future growth were "probably bleaker now than at any time since the finance led crisis in 2008".

He said uncertainty over Brexit was the biggest headwind facing the economy but warned the prospect of a second independence referendum "further heightens the overall confusion around Scotland’s future".

He said firms would be particularly concerned about the possible currency of a go-it-alone Scotland and the prospect of tax rises, given the newly independent state's need to control its sky high deficit.

He concluded: "Scottish growth had looked poor throughout most of 2015 and prior to that had been highly dependent on a booming Construction sector that was never going to last.

"In normal circumstances one would have expected this to dominate the political discourse but instead Scottish politicians have been consumed by two referendums and two elections.

"As a result too little attention has been paid to the underlying weakness of the Scottish

economy and what might be done to improve matters.

"The possibility of Brexit or Scottish

independence only heightens worries over the short to medium term growth prospects."

The Scottish Government's business minister, Paul Wheelhouse, insisted the employment figures demonstrated the "underlying resilience" of the economy.

However, he admitted "there is more that we can and must do".

He agreed firms faced uncertainty over Brexit and repeated Nicola Sturgeon's pledge to try to protect Scotland’s relationship with the EU.

Secretary of State for Scotland, David Mundell, said:

"It is positive news that employment in Scotland has risen and unemployment has fallen during the second quarter of 2016.

"That means more people in Scotland enjoying the security of a regular wage.

"But with Scotland’s economy showing little growth over the past year, and the country’s unemployment rate still higher than the UK overall, there is no room for complacency."