SCOTLAND’S economy is set to enjoy its best year since the onset of the credit crisis though a number of risks remain, a top think-tank said today.
Revising its 2014 forecast sharply upwards, the EY Scottish Item Club said the economy was likely to benefit from rising employment levels, a recovering property market and improved consumer sentiment.
Its summer update forecasts gross domestic product (GDP) expansion of 2.4 per cent this year, a marked increase on the 1.7 per cent predicted at the end of 2013.
Further growth of 1.9 per cent is forecast for 2015 and 2016, though that would still leave Scotland’s economy trailing that of the UK as a whole. Economists pointed to the relatively high reliance on the public sector north of the Border and the nation’s lower population growth for the gap.
Dougie Adams, senior economic advisor to the EY Scottish Item Club, said: “This year is shaping up to be the best for Scottish economic growth since the onset of the financial crisis, with business investments and exports adding momentum to the consumer-driven recovery.”
Jim Bishop, senior partner at the Scottish operation of accountancy giant EY, formerly Ernst & Young, added: “Continued levels of inward investment, falling unemployment and the anticipated growth of Scotland’s economy provide welcome causes for optimism.”
The report comes ahead of this week’s publication of the latest Fraser of Allander economic commentary – likely to be one of the last major surveys before September’s independence vote.
EY stressed that a number of factors – both international and home-grown – rendered its predictions “susceptible to change”. These include the ongoing crisis in Ukraine with its potential for disruption to global energy markets, restrictive financing conditions facing emerging economies and deflation in the eurozone.
Touching on the independence referendum, Adams said: “Both sides of the debate have produced anecdotes galore, but available data doesn’t provide any significant signals of the economic impact from uncertainty engendered by the referendum.
“Some businesses may be adopting a short-term ‘wait and see’ approach to big decisions about investment.
“While a Yes vote would usher in an inevitable period of uncertainty, the likely transfer of further powers following a No vote would also mean that the impact of constitutional change would remain on the business agenda.”
The report forecasts a 1.7 per cent increase this year in total employment in Scotland, followed by a 1.2 per cent gain in 2015, adding the equivalent of 45,000 and 33,000 full-time jobs, respectively.
Coinciding with the EY forecasts today, BDO’s latest business trends monitor suggests that Scottish companies’ hiring intentions are set to hit a record level in the third quarter of 2014.
Meanwhile, the latest Bank of Scotland “report on jobs” shows growth of staff placements gathering pace in May and following a slowdown the previous month.
Donald MacRae, the Bank’s chief economist, said the findings “provide further evidence that the recovery in the Scottish economy will continue throughout 2014”.