By Professor Graeme Roy, Director, Fraser of Allander Institute
We’re delighted that Deloitte are supporting the Fraser Economic Commentary. This new relationship provides us with access to better intelligence about the current conditions, challenges and opportunities facing the business community in Scotland. And it’s through partnerships like this that we can help inform public and business debate and support the next generation of young economic researchers in Scotland.
The Fraser Economic Commentary was first published in 1975 and it remains the only dedicated publication that focuses on research into the Scottish economy. Our Outlook & Appraisal section provides an authoritative and impartial account of recent developments in the Scottish economy and gives our take on prospects for the future. It is published four times a year – with the full report accessible at the Fraser of Allander website.
So what do we find?
As has been widely noted, the Scottish economy has been in a relatively fragile position now for the best part of two years. Growth has been well below trend and indeed, recently revised figures show that our economy actually contracted ever so slightly in 2016. The downturn in the North Sea has been the key driver behind this, although other parts of our economy – particularly in manufacturing – have also been finding conditions challenging.
But the most recent data has been more positive. Growth returned in the first three months of the year according to the latest official GDP statistics, with the economy growing more quickly than the UK as a whole. Scotland’s employment rate is now at a record high, whilst the unemployment rate is at a joint record low.
This demonstrates the underlying resilience of the Scottish economy.
The forecasts that we are publishing today show that we believe that the economy will continue to pick up this year and next. A number of sectors are poised to do well. For example, business and professional services – including financial services – have been remarkably robust in recent times and we see no reason for this to change. Scotland’s tourism industry has had a highly successful summer and the technology sector continues to expand at pace.
But there is no doubt that business conditions remain challenging for many. And whilst employment prospects are as good as they have ever been, earnings when actually in work continue to be squeezed.
In our report, we argue that the greatest risk on the horizon is the ongoing policy uncertainty as a result of the Brexit negotiations. Irrespective of your views for or against leaving the EU, it is clear that getting the exit process itself right – and ensuring a smooth transition – will be crucial.
In such uncertain times, a focus – both by policymakers and business – on the long-term drivers of growth such as innovation, investment and skills, is more important than ever.