THE Scottish economy has performed as badly as Spain since the financial crisis, according to an influential think-tank that is forecasting Scotland’s recovery will continue to lag behind the rest of the UK throughout next year.
The latest Ernst & Young Scottish Item Club report, published today, reveals that Scotland’s overall output has declined by 4 per cent over the last four years.
In its winter forecast, the group of accountants and economists says that 2012 will be the third year in five in which the Scottish economy shrank, and predicts growth of just 0.7 per cent in 2013 – well short of the expected UK figure of 1.2 per cent.
It says growth levels north of the Border are “well below normal” and mean the average Scot will not see a return to 2007 wealth levels for another four years.
Dougie Adams, senior adviser to the Scottish Item Club, said: “Slight growth should be generated in Scotland next year, so long as the worst fears over the eurozone and US budget prove overblown.
“However, the point at which the economy regains its past peak has been pushed beyond 2014. Taking account of Scotland’s increasing population, it will be at least 2016 before output-per-head surpasses pre-crisis levels.”
Adams said that, in addition to Spain, Scotland’s performance is close to that of Denmark and Finland – economies that are often used as comparators.
Over the same period, Germany and Switzerland have been Europe’s strongest performers, with growth of up to 3 per cent.
Comparisons with troubled Spain were labelled “unhelpful and inappropriate”. Scotland’s unemployment rate is about 8.2 per cent, a fraction above the UK average but a long way from the 26.2 per cent jobless rate that has led to a wave of protests in Spain. A Scottish Government spokesman said: “Whilst the IMF [International Monetary Fund] predict that the Spanish economy will shrink by 1.3 per cent in 2013, the Item club themselves say Scotland’s economy will grow in 2013.”
Item Club expects the Scottish economy to add 11,000 jobs in 2013, an increase of 0.4 per cent. Growth in employment is then expected to continue into the medium term with net employment growth of 14,000 in 2014 and 20,000 in 2015. This is despite its estimate that 60,000 jobs will have been shed in the Scottish public sector between the start of the 2008 financial crisis and the end of its forecast in 2015.
However, according to the Item Club forecast Scotland is uncomfortably far down the export rankings, trailing a number of eurozone countries with “well-recognised competitiveness problems”.
This, it states, “underlines the challenges faced by an economy that is going to be heavily reliant on exploiting external demand for growth in the foreseeable future”.
Jim Bishop, senior partner in Scotland at Ernst & Young, said that for the economy to turn a corner, firms need to start investing in order to target growing markets abroad.
“In times of economic struggle, the real success stories involve those businesses that have continued to invest in and fully exploit the opportunities presented by the global marketplace,” he said.