Scotland is enjoying sustained growth at last

Scotland is outstripping the wider UK and enjoying its most sustained period of economic growth in three years, according to a report published today.

Dougie Adams said that the growth in manufacturing is very encouraging. Picture: Robert Perry
Dougie Adams said that the growth in manufacturing is very encouraging. Picture: Robert Perry

The latest forecasts from accountancy giant Ernst & Young’s Scottish Item Club put economic growth north of the Border at 1.9 per cent this year – well above the group’s forecast of 1.4 per cent for the UK as a whole.

The robust performance will be followed by further growth of 1.7 per cent in 2014 and 2 per cent in 2015, the report said. The Item Club believes the debate surrounding next year’s referendum on independence is unlikely to have a noticeable effect on the figures.

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The improved picture is underpinned by increased consumer confidence and a greater willingness to spend, but E&Y warned that this must be supplemented by exports and investment to remain sustainable.

Dougie Adams, senior economic adviser to the E&Y Scottish Item Club, said: “Scotland’s economy is set to benefit from a surprise upsurge in consumer confidence this year, heralding a return to the peak level achieved prior to the financial crisis.

“However, the forecast is predicated on the recovery spreading from the consumer sector into investment and exports.”

All major parts of Scotland’s private sector – including manufacturing and construction – contributed to growth over the past year. And the public sector is expected to achieve output growth despite the continued climate of austerity.

Adams said: “The return to growth in manufacturing after two years in the doldrums is particularly encouraging, as is the revival of the construction industry following the sharp setback suffered in 2010.

“Employment is also now firmly on an upward path, but this remains dependent on the performance of private services, particularly the fast-growing professional, scientific and technical services segment.”

The total number of people with jobs in Scotland has increased by 2.6 per cent over the year, outstripping UK growth of 0.7 per cent and putting 40,000 more people back into work.

But Jim Bishop, E&Y Scotland senior partner, said: “The figures are of great encouragement, but the home-grown recovery requires deeper roots; it would be remiss to rely purely on a consumer-­led resurgence. With the E&Y Scottish Item Club predicting that Scottish spenders are set to be less gung-ho next year, investing in growth and improved export performance remain the keys to sustaining the recovery from here.”

Investment may get a boost from Scotland’s corporate dealmakers, as a survey released today by KPMG suggests they have the funds in place to pick up the pace in mergers and acquisitions (M&A).

More than three-quarters of those surveyed now expect healthy M&A activity in the coming year, while close to nine in ten of those asked no longer saw a lack of finance as a major issue.

Conducted at the accountancy firm’s recent M&A forum events in Glasgow and Aberdeen, the survey found the energy sector continues to be the most likely to see deals.

Scotland’s professional dealmakers also have growing confidence in the renewables sector and in food & drink.

James Kergon, transaction services director for KPMG in Scotland, said: “It is interesting to note a significant rise in expectations for deal activity in the food and drink sector, with 30 per cent more of those we asked now predicting deals compared to our previous survey in June.

“For the first time in many years, the findings point to a positive lending environment with access to finance no longer considered a major obstacle to completing deals.”