2 minute read 7 Dec 2018
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How people, skills and investment are vital to building Scotland's economy

By

Mark Gregory

EY UK Chief Economist

Committed to using economics to drive informed decision-making in the public and private sectors. Helping rebalance the UK economy. LinkedIn Top Voice. Sports mad. Loyal supporter of Stoke City FC.

2 minute read 7 Dec 2018

Despite a strong 2018, Scotland’s economic growth in 2019 is forecast to fall behind the UK’s as its labour market weakens and investment slows.

While Scotland’s economy outperformed the UK’s in 2018, the tables are set to turn in 2019 with its real growth predicted to slow to 1.0%.

Scotland has proved it can grow its economy faster than the UK, but failing to invest in capital at this time will limit future growth and the possibility of outpacing the UK.
Mark Gregory
EY UK Chief Economist

Similar to 2018, consumer spending is expected to make a significant contribution to the Scottish economy in 2019, but this is due to be fuelled by consumers running down their savings rather than through a growth in wages.

The private services sector will continue to drive growth across Scotland, contributing more than 70% of GVA growth in 2019. Within this group, professional, scientific and technical activities are predicted to be the most notable, edging ahead of the UK’s performance in this area.

Economic growth in 2019

1.0

The percentage Scotland’s economic growth by GVA is expected to slow to in 2019

In terms of individual sectors, construction is forecast to have the highest growth rate, followed by professional, scientific and technical activities, with information and communication in third place.

The private services sector will continue to drive growth across Scotland, contributing more than 70% of GVA growth in 2019

Key findings

  • Economic growth (by GVA) in Scotland is forecast to slow from 1.6% in 2018 to 1.0% in 2019, while the UK is set to increase from 1.3% to 1.5% respectively
  • Scotland’s working age population is predicted to fall by an average of 0.4% per year for the next five years
  • Private services sector will continue to drive growth across Scotland, contributing more than 70% of GVA growth in 2019
  • Construction is the sector expected to drive most growth in 2019 at 3% GVA

Mark Gregory, UK Chief Economist, comments that "The pace of economic growth achieved in Scotland during the past year appears to be unsustainable as pressure mounts on the already delicate labour market and business investment remains subdued. Scotland has proved it can grow its economy faster than the UK but failing to invest in capital at this time will limit future growth and the possibility of outpacing the UK."

Read our Summer Update 2019

Summary

With Scotland’s future growth rate at risk, a coherent skills strategy addressing both short- and longer-term issues; a narrative from both UK and Scottish Governments telling a story of certainty and confidence; and increased business investment are all vital building blocks for Scotland’s economic growth.

About this article

By

Mark Gregory

EY UK Chief Economist

Committed to using economics to drive informed decision-making in the public and private sectors. Helping rebalance the UK economy. LinkedIn Top Voice. Sports mad. Loyal supporter of Stoke City FC.