Scotland to avoid recession amid falling economic growth

Scotland will avoid a recession despite the uncertainty over Brexit. Picture: Steven Scott Taylor
Scotland will avoid a recession despite the uncertainty over Brexit. Picture: Steven Scott Taylor
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Economic growth in Scotland is projected to fall slightly next year, but the country is expected to avoid recession amid uncertainty over Brexit, a new report has found.

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The latest PwC economic outlook report projects a fall in growth in Scotland from 1.3 per cent in 2017 to 1.2 per cent in 2018.

Meanwhile it predicts UK growth will slow from around 1.5 per cent to 1.4 per cent.

The report attributes the decline to slower productivity growth projections which outweigh the expectations of faster jobs growth.

PwC also analysed the impact of Brexit on migration, and the effect that the restriction of future migration from the EU could have on growth in certain sectors.

Scotland has the second highest proportion of European Economic Area (EEA) workers in the UK at 8 per cent, behind London at 14 per cent.

The analysis found that sectors most reliant on EEA workers include food manufacturing, construction, hotels and restaurants and warehousing.

While skills gaps left by lower future net migration from the EU could be filled by UK nationals and automation, this will take time, the report found.
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David Brown, head of government and public services for PwC in Scotland, said: “The impact of Brexit on immigration from the EU will not be known for some time, but if numbers are reduced then government and businesses will need to work together to try and fill skills gaps.

“While enhanced training of UK nationals and automation might be a solution in certain sectors if we look 10 to 20 years ahead, realistically they are unlikely to make up fully if there is any large reduction in EU migrant workers over the next five to 10 years.

“Healthcare, hospitality, retail and construction are particularly dependent on EU workers. It is important that not only do we take steps to retain the EU migrants already living in the UK, but we also consider carefully how to make provision for them in the new immigration system post 2021.”

Scottish ministers have said the UK Government should devolve immigration to Holyrood to allow for bespoke arrangements north of the border.

MSPs voted earlier this week to back calls for a differentiated and flexible immigration system for Scotland.

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