Scottish economy gathering ‘real momentum’

The report points to 'clear signs of recovery' in the Scottish economy. Picture: PA

The report points to “clear signs of recovery” in the Scottish economy with GDP growth growing from 1.6 per cent last year to around 2.8 per cent in 2014, a figure which PwC has revised upwards from the 2.4 per cent it projected in March.

The latest figure is also higher than the latest Fraser of Allander economic growth forecast of 2.4 per cent which was revealed in June.

PwC’s expectations for Scotland are in line with the predicted growth for the UK economy of around 3 per cent in 2014, which is expected to ease slightly to 2.6 per cent in 2015 as consumer spending growth moderates.

London is expected to continue to lead the recovery with growth of 3.4 per cent in 2014, but all parts of the UK should see growth of above 2 per cent this year, it said

Paul Brewer, government and public sector partner for PwC in Scotland, said: “These latest figures, alongside those from Fraser of Allander earlier this summer, are welcome signs that the Scottish economy is gathering real momentum.”

But he said a significant increase in business investment was needed to capitalise on growing confidence.

“From a business perspective, while we are seeing anecdotal evidence of increasing confidence across many business sectors, this isn’t necessarily feeding into the volume of investment that is needed to help balance the recovery.

“Unlike at the height of the recession, access to finance is not the key issue, with factors such as the time for investment decisions to be fulfilled and pre-Referendum uncertainty more likely causes.

“We need to see a significant step up in investment if we are to really harness this economic momentum.”

Brewer also pointed out that while expected higher interest rates will help savers and reduce pension fund deficits, households need to bear in mind likely future interest rate rises in any decisions on mortgages or other longer term loans.

The report highlighted a number of downside risks to predicted economic recovery across the UK including a slowdown in activity in the Eurozone, unrest in Ukraine and the Middle East, with a potential impact on global energy prices, and potential problems in some major emerging markets.

But it also said there were upside possibilities including stronger than expected business investment and a return to real wage growth pushing up consumer spending faster than projected.

PwC’s report also confirms the UK housing market has seen prices accelerating across all regions in the last 18 months.

It said Scottish house prices could rise by 5 per cent this year and by the end of 2015 the average property could be worth around £198,000, up from £181,000 at the end of 2013 – a rise of almost 10 per cent.

“While not at the same pace as we’re seeing in the south of  England, it does appear that house prices in Scotland have been accelerating of late,” said Brewer.

“However, this pace is unlikely to continue in the long term.

“In the period from 2016 to 2020, Scotland is forecast to experience the slowest growth of all the UK regions with the exception of London – the average rise per annum will be 2.8 per cent compared to 2.7 per cent in London.”

Scottish economy gathering ‘real momentum’ – PwC