Economic growth in Scotland will remain “subdued” in 2019 and 2020, but slightly outpace the UK overall this year, according to a report published today by PwC.
The accountancy giant is also calling for a boost to the UK’s levels of productivity – which are currently lagging behind other advanced economies – saying action could boost the economy by at least £80 billion.
The Big Four accountant in its latest UK Economic Outlook report projects growth of 1.3 per cent in Scotland this year. This is down 0.3 percentage points from July’s projection, but ahead of the 1.2 per cent expected across the UK.
In 2020, growth is projected to fall back to 1 per cent, in line with the UK and considerably below the UK’s long-term average rate of around 2 per cent.
PwC noted that official figures published last month estimate that gross domestic product (GDP) fell by 0.2 per cent in Scotland in the second quarter of the year, mainly because of a dip in construction output. “The GDP Quarterly National Accounts published in October suggest year-on-year growth in the second quarter of 0.6 per cent,” the accountancy giant added.
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The latest report also found UK GDP could be boosted by 4 per cent – or £83bn – if local areas with below-average productivity levels could make up even half of the gap. PwC found that UK output per worker is around 10 to 15 per cent behind Germany, France and Sweden – and more than 30 per cent behind the US.
In terms of economic growth, only London and the South-east are expected to grow at a quicker rate than Scotland this year, while in 2020 the ongoing economic uncertainty caused by Brexit will see growth fall across all 12 nations and regions measured by PwC.
The firm added that growth has slowed over the past two years primarily due to a dampening of business investment, resulting from both a lack of clarity over Brexit and heightened global trade tensions.
Stewart Wilson, head of government and public sector for PwC in Scotland, said: “Our latest projections indicate that Scotland’s economy should perform relatively well both this year and next, slightly ahead of the UK overall, however growth remains subdued relative to long-term trends.
“The economy is likely to remain subject to volatility given the current uncertainty in the country and across the world, however, there could be a modest uplift in business investment should the UK finally secure an orderly Brexit. Even so, uncertainty across the global economy means growth is unlikely to return to previous levels next year.”
The economic outlook report expects most industry sectors to see relatively modest growth in 2019-20.
PwC pointed to a horizontal strategy to improving productivity performance across a range of sectors, including a lifelong upskilling strategy, and a financial system that supports investment by firms of all sizes.