Brexit still brake on investment
Oil recovery offers hopes for Scottish economic growth
A recovery in oil is helping drive growth
A more positive outlook for the Scottish economy, driven by a recovering oil and gas sector, has emerged in the latest survey by the Fraser of Allander Institute.
It says growth is set to recover this year but remain below trend. In its latest Economic Commentary, the Institute forecasts a 1.2% increase in Scottish GDP in 2018 and 1.3% growth in 2019.
This makes its outlook more optimistic than the government’s own official forecaster, the Scottish Fiscal Commission.
The researchers cite a strengthening oil & gas sector, a robust global economy and a pick-up in household and business confidence as key factors driving its assessment.
Nevertheless, the Institute cautions that following the disruption to the economy from the ‘beast from the east’ in March, new Scottish GDP data to be published next week is likely to show weak growth (if any) for the first three months of 2018.
If this is indeed the case, any such an impact should be temporary with growth bouncing back later in the year.
John Macintosh, Tax Partner at survey partner Deloitte, said: “There are some encouraging signs that Scotland’s economy is improving and will perform better this year than last year.
“Some of Scotland’s exports, particularly food and drink, are showing strong growth and sentiment in the oil and gas sector, which is emerging from a hugely challenging time, has returned to its highest level since spring 2013.
“Businesses should now take steps to ‘future-proof’ themselves by preparing for the opportunities and challenges ahead. This should include collaboration with peers and government, investment in skills development, digitalisation and a commitment to innovate and adapt to a fast-changing working environment.
“While there are grounds for cautious optimism, business and government need to make sure they remain focused. This is particularly important given the potential distraction of the constitutional challenges which lie ahead.”
In its latest assessment, the Institute concludes that Brexit remains the greatest risk to Scotland’s economic recovery.
Professor Graeme Roy, Director of the Institute, said: “With just nine months to go until the UK leaves the EU, the lack of a coherent plan from within Whitehall about the UK’s long-term economic relationship with our most important trading partner risks holding back Scotland’s recovery.
“Irrespective of whether you agree or disagree with the decision to leave the EU, the uncertainty caused by this lack of clarity is making it extremely difficult for businesses to develop contingencies or plan for the future.
“Two years on from the referendum outcome, simply kicking the can down the road is simply no longer a credible economic strategy for government to adopt.”