Deloitte study calls for action on '˜economy conundrum'

Scotland needs to take a fresh approach to safeguard its future as it faces an 'economy conundrum' over job-creation and productivity, according to a report from Deloitte.

Deloitte's latest Power Up study included insight from CBI director-general Carolyn Fairbairn (pictured) and Deloitte's chief economist Ian Stewart. Picture: Anthony Devlin

Its latest Power Up study, which tapped into extensive data from the Office for National Statistics and insight from business leaders such as Deloitte’s chief UK economist Ian Stewart and CBI director-general Carolyn Fairbairn, the accountancy giant explores how much improved productivity could be unlocked across the UK’s regions and nations.

It found that while Scotland has outperformed the UK average in productivity growth over the last ten years, closing a previous gap, the growth rate has fallen across the UK as a whole since the financial crash. Slowing productivity across certain sectors and lower levels of investment in high productivity sectors were seen as factors key to this decline. However, Scotland, like the rest of the UK, has rapidly created jobs over the last eight years, with unemployment down from 8.8 per cent in 2010 to 3.8 per cent in the third quarter of this year.

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Deloitte added that sectors including information/communication and professional services showed that productivity and employment growth have not been mutually exclusive.

Scotland’s output per head was found to be higher than the average of all other UK regions and nations, except for London and the south east of England. But Deloitte raised concern over low growth in Scotland.

Stephen Williams, senior partner for Deloitte in Scotland, noted that the report has shown “why we must start to think and plan differently to ensure future, sustainable growth”.

He added: “There are clear signs that Scotland’s businesses, educators and policymakers must collaborate to shape the skills that will be essential for driving productivity and economic growth. In addition, businesses will need to increase investment in upskilling their talent pools in the face of advancing technology, artificial intelligence and robotic capabilities. Underpinning this is the inherent need for leading connectivity infrastructures and associated investment.”

And he stressed that Scotland needs more businesses of scale that are “competitively positioned” across global markets.

“This will require greater vision from Scotland’s private companies, as well as support in the development of their leadership skills and confidence to enter and succeed in export markets.

“The report also highlighted that with digital strategies and technology innovation continuing to influence productivity gains in the short term, Scotland’s business leaders will need to be open and agile to truly transformational opportunities.”

But he said Scotland’s track record in innovation and entrepreneurialism “stands businesses in good stead to meet the challenges ahead”.