A boost in the fortunes of the North Sea oil and gas industry should drive stronger growth in the Scottish economy but Brexit continues to pose a risk, a new report has said.
The latest State of the Economy report by Scotland’s chief economist Gary Gillespie confirms the Scottish economy strengthened in 2017 and continued to grow into the first quarter of 2018.
Figures published earlier this week showed GDP was up 0.2 per cent over January to March, compared to 0.1 per cent for the UK as a whole.
However growth was said to be “muted” in Scotland and the UK compared to global growth forecasts at close to 4 per cent for 2018 and 2019.
“For Scotland, the rebound in North Sea output, profitability and confidence following a difficult three-year period should support stronger growth in that sector and Scotland this year and beyond,” the report said.
The GDP figures also pointed to a “positive” strengthening of production and manufacturing in Scotland but indicate a further contraction of construction activity, possibly due to adverse weather at the start of the year.
“On Brexit, as uncertainty remains in relation to post-exit transition plans, we may see increased volatility in economic data as firms bring forward activity, such as stock purchases, to hedge against disruptions in supply lines or invest to consolidate their supplies,” Mr Gillespie added.
The report highlighted independent growth forecasts for Scotland of between 0.7 per cent and 1.3 per cent in 2018, with slighter stronger growth expected in 2019.
“The current range reflects the uncertainty at this time, while the longer term challenges, which are affecting many advanced economies, of weak productivity growth and slow population growth remain important for Scotland,” the report said.
“However, recent trends in exports and inward investment to Scotland, coupled with strong labour market performance, continue to demonstrate the underlying resilience of Scotland’s economy.”
Economy Secretary Derek Mackay said: “With Scotland’s economy continuing to grow at the start of the year, it’s welcome to see the improving outlook for the oil and gas sector alongside the continued strong performance in our labour market.
“Scotland’s economy is strong, with output per head the highest in the UK outside London and the south-east. We are also one of the top destinations for inward investment, while Scottish productivity has grown faster than the UK’s over the past decade.
“We are using the powers we have to boost the economy and ensure that our economic potential is realised including our investment of almost £2.4 billion in enterprise and skills, the most competitive business rates package in the UK, while investing in our National Manufacturing Institute and Scottish National Investment Bank.”