Scottish Independence: Vote may bring investment

Scotland’s economy is expected to grow by 0.8% this year, up 0.1% on previous forecasts due to a strong economic performance at the end of 2012 and brighter global economic outlook, business advisers Ernst & Young said.

However, investors are facing a raft of uncertainties in the months ahead with the pending independence referendum, crisis in the eurozone, and tentative recovery in the US and around the world.

Ernst & Young said: “The entire forecast is dependent on the assumption that the eurozone remains intact, with growth in the US sustained and world trade growth accelerating.

“Additionally, forecasts for the future of the Scottish economy face uncertainties thrown up by Scotland’s slower recovery of employment since 2008 and the potential impact of next year’s referendum.”

Recovery

It added: “Next year’s referendum will put Scotland in the global news. On the grounds that no publicity is bad publicity this could be positive in terms of inward investment.

“However, it must be equally likely that a ‘wait and see’ mind-set will develop over the next 15 months that will see key decisions by domestic investors postponed and a greater, if temporary, challenge in attracting highly-skilled people to come to work in Scotland.”

Dougie Adams, senior economic adviser to the Ernst & Young Scottish ITEM Club, said: “The hope is that the recovery will really take hold as we move into 2014, but it can’t be taken for granted.

“Forecasts on exports and investment remain hostage to developments in Europe where the spectre of widespread defaults still loom.

“Domestically, it still remains to be seen whether a ‘wait-and-see’ attitude will develop towards Scotland while the country’s constitutional future is decided.”

Scottish Conservative finance spokesman Gavin Brown said: “The referendum is bound to lead to a degree of uncertainty.

“There are clearly many, many unanswered questions around separation and important issues which are simply not being considered carefully by the SNP.

“The Scottish Government needs to respond to these concerns by setting out in great detail what its plans are for separation, and it has to do so as a matter of urgency.”

Improvement

A Scottish Government spokeswoman said: “This report provides welcome recognition that Scotland is out-performing the UK when it comes to economic growth, tackling unemployment and capital investment.

“Recent statistics show employment in Scotland is at its highest level since 2009 - with higher employment and lower unemployment rates than the UK’s other nations - while youth unemployment in Scotland continues to fall and is lower than in the rest of the UK.

“New analysis by the Scottish Government and contained in a joint Scottish Government/STUC Labour Market research paper shows that over the year to January-March 2013 there was a 41,000 increase in full-time employment in Scotland. This accounts for the vast majority of the improvement in overall employment in Scotland over the year.

“In addition, today’s KPMG survey shows Scottish businesses are confident about the year ahead while Ernst and Young’s own survey on foreign direct investment from earlier this month showed Scotland’s competitive position within the UK is increasing, with inward investment projects coming to Scotland at their highest level for 15 years.

“Business growth and investment are at the heart of our policies to secure economic growth. While the Scottish Government will continue to do all we can to help our businesses thrive with the full fiscal and economic powers of independence we could do even more to support companies, strengthen our economy and create jobs.

“This report demonstrates that Scotland has strong foundations and there can be no doubt that Scotland has the potential to be a successful independent nation.”