Stubbon challenge

Scotland needs action to close productivity gap

Tracy Black

Tracy Black: swift progress needed (pic: Terry Murden)

Scotland’s productivity continues to lag competitors in the rest of the UK and overseas across several key indicators, according to a key report.

While there are some encouraging signs of improvement, it says action is needed from both business and government to help steer the country towards recovery, competitiveness and sustainable growth. 

The third edition of the annual CBI/KPMG Scottish Productivity Index found that Scotland is behind other parts of the UK or international competitors in 9 of the 13 productivity indicators. This includes business investment, exporting and innovation.

Tracy Black, CBI Scotland director, said: “Even without taking COVID-19, and the latest uncertainty around the Omicron variant, into consideration, Scotland’s struggle to boost productivity has been a stubborn challenge for decades.

“Scotland does a great job in terms of setting ambitious long term economic goals, but businesses desperately want to see swift progress in moving from high level discussion to impactful delivery. Ambition must translate into action now or we risk the gap widening.”

James Kergon, senior partner at KPMG Scotland, added: “Tackling the productivity conundrum must remain a long-term ambition for Scotland, particularly given the stalling impact the past two years have had on growth.”

The Index was compiled in conjunction with the Fraser of Allander Institute and the Diffley Partnership.

The authors call for the for the Scottish government to use the business rates system to incentivise investment, introduce an SME training tax credit and speed up the roll out gigabit capable broadband across the whole country.

They say businesses should increase investment in training and adopt more technology to enhance efficiency while improving mental health wellbeing among their employees.

Scottish Labour’s Finance and Economy spokesperson Daniel Johnson said:  “This report lays bare the damage the SNP have inflicted on our economy.   

“Years of economic mismanagement has left us lagging behind, making our recovery from the pandemic even more of an uphill battle.  

“We need to get productivity back on track if we are to rebuild, protect jobs and plug the blackhole in public finances.  

“The stakes are higher than ever – the SNP must take responsibility for their own failures and deliver the real economic strategy we have been so sorely missing.” 

Scottish confidence dips

The confidence and resilience of Scottish businesses is facing another dip over the impact of Covid this winter, according to Grant Thornton UK’s Business Outlook Tracker.

Optimism in Scotland about the UK’s overall economic prospects averaged 75% over the year, just above the UK average of 72%.

The biggest dent in confidence was recorded in the final survey, conducted in late November and early December, with 20% of Scottish businesses describing themselves as ‘pessimistic’ about the future of the UK economy. 

For the UK as a whole, confidence around revenue growth within businesses peaked in the summer, with 83% expressing optimism, the figure plunging minus -17 percentage points to 66% by December.

Andrew Howie, managing partner for Grant Thornton in Scotland, commented: “Over the year, our survey demonstrates that Scottish business leaders are resilient and focused on what can be achieved, no matter how trying the circumstances.

“There are opportunities for Scotland to grasp, not least through investment in the industries of the future and helping businesses to scale-up in every part of the economy.”

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