Outlook for Scottish economy downgraded for 2023 amid 'signs of apathy'

The forecast for Scotland’s economic growth this year has been been slashed against a backdrop of high interest rates and wider economic uncertainty, according to a new report.

Professor Mairi Spowage says Scottish economic growth in 2023 so far 'has presented a pretty mixed picture'. Picture: contributed.

High-profile think tank the Fraser of Allander Institute at the University of Strathclyde now expects Scotland’s economy to grow by 0.2 per cent this year, down from its previous set of forecasts in June, saying data for 2023 to date has been much weaker than expected.

In its latest quarterly economic commentary, sponsored by Deloitte, it said growth in the Scottish economy has been faltering and pretty muted over 2023, with the sluggish backdrop leading to investment being delayed or cancelled – echoing new findings from the Scottish Chambers of Commerce.

The Institute also said the most recent data on inflation, which held steady at 6.7 per cent in September, “shows that the high inflationary and interest rate environment is likely to persist for longer than previously thought”, although its forecasts for 2024 and 2025 are unchanged since June, at 0.7 per cent and 1.2 per cent respectively,

Professor Mairi Spowage, director of the Institute, said: “Growth in 2023 so far has presented a pretty mixed picture, while much better than we were expecting at the end of 2022 – with the predictions of recession proving thankfully unfounded. Despite this, though, it is clear that businesses are not feeling that conditions are great right now, with many delaying or cancelling investment due to the high interest rate environment and wider economic uncertainty.”

Angela Mitchell, senior partner for Scotland at Deloitte, said: “This quarter’s commentary shows a thoroughly mixed outlook for our economy and, accordingly, for business and consumers. [It also] raises the critical need for meaningful engagement and co-production between industry and government in enacting the kind of systemic change that is needed for vital sectors of our economy to flourish”.

The latest report comes ahead of the UK Government’s Autumn Statement, set to be revealed on November 22, ahead of the Scottish Budget set for December 19. João Sousa, deputy director of the Institute, commented on the outlook for the public purse, stating: “There have been a number of spending commitments made by the Scottish Government in recent weeks that are likely to make the situation more challenging, including funding the council tax freeze.”