Scottish economy to lag behind rest of UK this year

EY said the Scottish economy needs to move away from its over-reliance on oil and gas, construction and financial services. Picture: Jeff J Mitchell/Getty Images

The EY Scottish Item Club 2017 summer update said the sluggishness will come as robust consumer spending recedes and businesses remain reluctant to invest.

• READ MORE: Markets and economy

It said the Scottish economy faces a “challenging” 2017, with growth predicted to reach 0.9 per cent – half the rate forecast for the UK as a whole.

The retail sector is expected to suffer the most from further consumer pressures, with spending growth expected to slow to 1.1 per cent from 2.4 per cent in 2016.

Own an innovative start-up? Find out how to win £5,000 for your business

However, the outlook for manufacturing is brighter, with output expected to grow in line with the UK economy for the first time since 2013.

Dougie Adams, senior economic advisor to the EY Scottish Item Club, said Scotland’s economy “is stuck in the slow lane,” due in part to many large public sector infrastructure projects coming to an end.

• READ MORE: Scottish economy fears as UK growth revised downward

Mark Gregory, EY’s chief economist, UK and Ireland, said Scotland’s economy ­failing to keep pace with the rest of the UK “sends a clear message that business and government will have to work harder… to achieve sustained growth”.

200 Voices: find out more about the people who have shaped Scotland

He added: “The economy has to rebalance away from reliance on public-funded major infrastructure projects. Diversification is also required to help move away from an over-reliance on oil and gas, construction and financial services.”

Click here to ‘Like’ The Scotsman Business on Facebook