Scots economy set for growth this year – but rate forecast to slow down

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The Scottish economy will experience modest growth this year, but at a rate below that previously forecast and less than the rest of the UK, a leading financial report has predicted.

The EY Scottish ITEM Club 2018 summer update published today said Scotland’s non-oil GDP forecast will grow by 1.3 per cent in 2018, a figure downgraded from the 1.4 per cent predicted in December last year.

The economy will grow this year.  Picture: John Devlin

The economy will grow this year. Picture: John Devlin

Furthermore, the UK is expected to stretch ahead of Scotland with 1.6 per cent GDP growth forecast for this year. In December last year it had been predicted that Scottish growth would match the performance of the UK as a whole.

According to the report, Scotland’s growth will be driven by consumer spending, albeit at a slower pace.

The rate of consumers’ expenditure is expected to fall from 1.1 per cent last year to 
0.5 per cent in 2018.

The report said export performance would have a have an influential bearing on growth.

Last year the strength of Scottish exports led to net trade boosting the Scottish economy. The document predicted that this would continue – although a strengthening pound, making products more expensive to international buyers, would temper some of the positive impact this year.

The report predicted ­modest employment growth of 0.7 per cent in 2018, falling to 0.3 per cent in 2019. Office-based private services are again expected to generate the bulk of new jobs (33,800 from 2017 to 2021), the construction sector is expected to create 14,500 jobs as output in the sector recovers.

Sectors reliant on consumer spending and tourism, such as accommodation and food services, wholesale and retail, and arts, entertainment and recreation are also expected to grow in employment terms. While retail is expected to experience modest job losses in 2018.

Mark Gregory, EY’s UK chief economist, said: “Economic growth in Scotland is moving beyond the 0.8 per cent growth rate we saw in 2017.

“While this demonstrates that Scotland is set to successfully pull out of an economic tailspin and return to growth of above 1 per cent, there are also signs that UK-wide economic growth will remain firmly ahead of Scotland’s in the near term.”

Scottish Conservative finance spokesman Murdo Fraser said: “Slow growth has dogged Scotland’s economy for too long, and it’s happened on the SNP’s watch.

“It’s the consequence of a government that has an anti-business approach and has prioritised squabbling about constitutional issues above the economy.”