Economic research from the University of Strathclyde’s institute forecasts that, even in Scotland, the positive effects of lower fuel prices on firms and consumers will outweigh the loss of jobs and investment in the North Sea.
Brian Ashcroft, emeritus professor of economics at Strathclyde university, said: “The falling oil price and recovering investment could provide a welcome boost to the recovery just as there are signs of some slowing in the rate of growth in most major economies except the US, and as the troubles in the eurozone worsen with the increased risk of deflation and a distinct threat of Greece exiting the euro.
“The absence of good data and uncertainty about future oil prices allow only a crude estimate of the impact on the Scottish economy of the fall in oil prices.
“Nevertheless, we estimate that the impact on employment this year could range from 9,700 net additional jobs to a net job loss of 600 on best and worst case scenarios.”
He added: “While the boost from low oil prices to real disposable incomes and reduced production costs is to be welcomed, we must not forget the oil and gas industry, which is major asset to the Scottish economy.”
In the latest economic commentary, sponsored by accountancy firm PwC, the Fraser of Allander Institute estimated that Scotland’s economy expanded by 2.8 per cent last year, making it slightly more dynamic than the UK as a whole.
And the institute upped its forecasts for 2015 and 2016 to 2.6 per cent and 2.4 per cent respectively.
David Glen, head of tax at PwC in Scotland, said: “The Scottish economy continues to show healthy, sustained growth with sectors such as manufacturing and production, construction and business services helping drive this momentum.
“While the latest forecast should boost business confidence in the short to medium term, the challenge will be keeping this recovery on track.”
He said that as a result of the volatile, low oil prices, “there is a real danger of an economic triple whammy across the oil and gas industry”.
“Reductions in income may result in incremental investment becoming uneconomic, potentially diminishing field life and accelerating decommissioning,” he said.
“With the 2015 UK budget on the horizon, there is real scope for the Chancellor to reform what is currently a highly complex tax regime: protecting existing production; incentivising future exploration; safeguarding skills in the North Sea and across the UK supply chain; and preventing what could be an irreversible decline in the oil and gas industry.”
The report came amid further evidence that the UK-wide recovery is picking up the pace again this year, following a slow-down in the growth rate to 0.5 per cent in the final quarter of 2014.
Britain’s dominant services sector posted another solid reading on the Cips/Markit purchasing managers’ index (PMI)
The index gave a reading of 56.7 in February, down from 57.2 in January but well above the no-change mark of 50.
It follows positive readings from the manufacturing and construction sectors and economists said the data suggests that the UK’s GDP was on track for growth of 0.6 per cent in the first quarter.
SUBSCRIBE TO THE SCOTSMAN’S BUSINESS BRIEFING