Scotland's economy to lag UK but 'encouraging' signs for year ahead, says new PwC report
Real gross value added (GVA) - a key measure of economic output - is expected to be just 0.3 per cent higher across 2023 relative to last year, according to the latest PwC UK Economic Outlook. While the rate of growth north of the Border is greater than that predicted for the West Midlands (0.2 per cent) and in line with rates for the north-east of England and East Midlands (both 0.3 per cent), it lags behind the rest of the UK’s nations and regions, particularly London at 0.8 per cent and Northern Ireland, Wales, East of England and the north-west, all of which are predicted to close out this year with growth of 0.6 per cent.
In terms of the UK as a whole, PwC is expecting the economy to avoid a recession in 2023 though it is likely to have contracted in the third quarter. On an annual basis, the UK economy is expected to grow by about 0.5 per cent in terms of real GDP (gross domestic product, or the main measure of economic output) this year and next, which has been revised upwards from PwC’s earlier projections in the year.
The firm said regional disparities highlighted growth in the services sector which has positively impacted London’s economic activity, and strong growth in the public sector which benefited Northern Ireland. Some regions, including Scotland, are seeing slower rates of growth because of high exposure to the manufacturing sector - which has been hit by supply chain issues - as well as high energy prices and the fallout from Brexit, PwC added.
Jason Morris, regional market leader at PwC Scotland, said: “Whilst we look to be ending the year in Scotland on a more subdued note in terms of economic growth in comparison to other regions across the UK, the rate of economic growth has remained steady throughout the year.
“Our recent Regional Productivity Tracker highlighted Scotland’s productivity and prowess in manufacturing which has, unfortunately, suffered supply chain issues over the past couple of years. However, these have now largely recovered, and we expect activity within the sector to pick up into 2024 as a result - particularly once relatively lower energy prices start to feed through to businesses within the sector - which is encouraging.”
The contraction of sectors related to oil and gas production in 2023 is also highlighted as a factor in Scotland’s lower-than-average growth.
Morris added: “The latest Economic Outlook, and the differing regional growth rates, serves as a reminder that there remains a need to close - or simply narrow - ongoing productivity gaps, by taking advantage of opportunities for growth and investing in businesses. Whilst some of the factors impacting economic growth in Scotland could potentially be attributed to a slowing in North Sea oil production, as a nation we have a central role to play in a fair energy transition.”
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