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Only south east grows faster

Scottish growth expected to dip, but beat UK output

scottish economy

PwC says the economy faces ‘undoubted challenges’


 

Economic growth in Scotland is expected to dip to 1.2% this year before accelerating to 1.6% in 2020, according to PwC’s latest UK Economic Outlook report.

PwC predicts that in 2019 Scotland’s GVA growth will outpace the UK, which is expected to grow by 1.1% before also reaching 1.6% in 2020. Gross value added (GVA) is the sum of gross domestic product (GDP) with taxes and subsidies taken into account.

Of 12 nations and regions analysed by PwC, only the South East of England is expected to grow at a faster rate than Scotland this year, at 1.3%. Scottish growth will match London and the South West.

Economic growth across the UK is expected to slow as a result of the drag on business investment due to ongoing uncertainty over the outcome of Brexit.

The projections come as official figures show Scotland saw GDP growth of 0.3% in real terms during the fourth quarter of 2018, driven by growth in business services and finance. This follows growth of 0.2% in the third quarter of 2018. Compared with the same period in 2017, growth in the Scottish economy expanded by 1.3%, in line with the UK overall.

Lindsay GardinerLindsay Gardiner, PwC Scotland regional chairman, pictured, said: “While there are undoubted challenges affecting the UK, it is encouraging to see the Scottish economy among the most resilient parts of the country.

“In spite of the ongoing uncertainty over the UK’s future relationship with Europe, we are continuing to see investment in the private and public sectors, with City Deals funding across the country set to play an important role in Scotland’s near-term development.

“Scotland’s GDP grew by 1.4% compared to 2017, the same as the UK, so the outlook for the current year, in GVA terms, suggestions a slight contraction as macro-economic factors relating to Brexit come to a head, before growth accelerates to 1.6% in 2019.”

The Outlook says that consumer spending has driven the UK economy since the June 2016 referendum to leave the European Union, and this has been supported by recent increases in real income growth. Countering this is a cooling of the housing market, and further rises in household borrowing which may be hard to sustain.

The Outlook says that consumer spending has driven the UK economy since the June 2016 referendum to leave the European Union, and this has been supported by recent increases in real income growth. Countering this is a cooling of the housing market, and further rises in household borrowing which may be hard to sustain.




John Hawksworth, chief economist at PwC, comments: “Our main scenario for UK GDP growth in 2019 has been revised down from 1.6% to 1.1% since our last report in November, reflecting growing evidence of a negative drag on business investment as well as a less favourable global economic environment.

“Recently, there have been signs from housing and labour markets that London’s performance relative to other regions has been less strong. We expect this to continue in 2019-20, with London growing only slightly faster than the UK average rate in those years.

“Brexit-related uncertainty is likely to dampen growth in all regions in 2019, but there could be some acceleration in growth across the UK in 2020 if an orderly Brexit can be achieved. In this scenario, the Bank of England could resume very gradual interest rate rises later in 2019 or in 2020, but it is unlikely to take any action until the fog of uncertainty has cleared.”



One Comment to Scottish growth expected to dip, but beat UK output

  1. Whilst Brexit can be pointed to as a factor for the current slow down, it’s my opinion, given the slowdown worldwide including our neighbours in the EU, that Brexit is less of a decisive factor than first thought. 1.1% growth, whilst our neighbours flirt with recession, is actually a moderate growth, all things considered. Consumer spending is certainly helping this drive. And consumer spending will continue to play a factor when wages are rising faster than inflation. More real cash into pockets means more money for consumer to spend. I thin k we should lower corporation tax slightly more to continue to allow investment by businesses in the UK.

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