Growth to be half of UK figure
Scottish economy “stuck in slow lane” says report
Scotland’s economy is “stuck in the slow lane” and expected grow at half the rate of the UK, according to new data.
Previously buoyant consumer spending is fading and businesses need to be encouraged to invest.
The slowdown is also blamed on a number of “big ticket” construction projects nearing completion with little sign of new work to replace them.
Growth in Scotland is predicted to reach 0.9% as spending slows to 1.1% in 2017 from 2.4% 2016.
However, the EY Scottish ITEM Club Summer Update sees a bright spot for manufacturing with output expected to grow in line with the total economy for the first time since 2013.
All manufacturing sub-sectors are expected to grow as weaker sterling and a pick-up in global demand provide a boost to exports.
Despite this, the number of Scots in work is expected to fall by 0.1% this year, 0.5% next year and 0.3% in 2019.
Mark Gregory, EY’s chief economist, UK and Ireland, said: “Scotland’s economy is showing signs of slowing faster than the rest of the UK which sends a clear message that business and government will have to work harder and smarter to achieve sustained growth.
“The economy has to rebalance and shift away from a reliance on public funded major infrastructure projects. Sector diversification is also required to help move away from an over reliance on the oil and gas, construction and financial services sectors.”
Dougie Adams, senior economic advisor to the Scottish ITEM Club said: “Consumer spending, which last year proved surprisingly resilient and helped buoy the economy, is fading.”
Meanwhile, contractions in the production and construction sectors were responsible for Scotland’s weak GDP performance in 2016 when it grew by only 0.4% against 1.8% for the whole of the UK.
Mr Adams, said: “Scotland’s economy is stuck in the slow lane.” He blamed the completion of a number of public sector funded infrastructure projects.
“One factor is the ending of the outsized contribution to GDP growth from construction as many of the big ticket public sector funded infrastructure projects near completion,” he said.
Mr Gregory concluded: “Stimulating business investment in Scotland both in terms of physical assets and skills could deliver extensive, long-term economic benefits. This presents an opportunity for public and private sectors to define a new way of working together in order to drive further economic growth.
“Business investment is imperative to the long-term health and growth of the Scottish economy but is currently subdued. Government can help de-risk investment by supporting the development of skills and infrastructure that businesses need so that companies can feel confident they can maximise their investment.
“A collaborative approach between public and private sectors will ensure projects, proposals and investments are prioritised to deliver the biggest return in terms of skills, jobs, economic benefits, productivity, innovation and competitiveness.”