Scotland’s sluggish economic performance over the last few years has been well-documented. In the face of a difficult period for the North Sea oil and gas industry and, more recently, a decline in construction activity and subdued growth in services, the country’s economy has struggled to build any significant momentum. But could that be about to change? Progress is slow and continues to lag behind the UK, but there is an air of cautious optimism.
The latest Fraser of Allander Institute (FAI) Economic Commentary indicates Scotland is on track to better last year’s performance. Annual growth was just 1.1% in 2017, therefore we cannot get carried away, but the FAI has forecast growth in Scottish GDP of 1.2% for 2018 and 1.3% for 2019 and 2020, reflecting that there are some signs of improvement.
The first of these is in the oil and gas industry. The FAI point to the rise in confidence within the industry, which recently reached its highest level since spring 2013. The industry has made great strides in the intervening period, particularly around creating efficiencies and a more collaborative approach, and is beginning to show signs of resurgence. Furthermore, growth of Scottish exports in international markets has been strong, particularly in food and drink in which Scotland continues to enjoy a fantastic reputation.
However, while not a problem unique to Scotland, our country’s inability to improve productivity remains a barrier to economic growth. The underlying causes for this are difficult to identify, but it is reasonable to assume that ongoing investment in innovation, technology and digital are pivotal to continuing progress around how work is done.
Such investment should not just be made in technologies of course, but in people too. Interestingly, this quarter’s Commentary also points to a resilient labour market, with high employment and low unemployment – in fact Scotland’s youth unemployment rate hit a record low of 9.2% in 2017. In a rapidly changing economy with an increasing focus on digital, companies must ensure their employees, of all levels, are armed with the skills necessary to maximise the benefits of any new technologies they are adopting and to help future proof our economy.
Our Digital Disruption Index, published in May this year, also shows that more time and resource needs to be devoted to digital skills. Some key findings include:
- Over a quarter (28%) of business leaders say they are not confident in their digital skills;
- Only 12% of executives believe school leavers and graduates have the right digital skills and;
- Only 16% of executives believe their talent pool has the capabilities to deliver their digital strategy.
Our economy has shown resilience over the past few years. Scotland is on track to improve its economic performance compared to last year. It is imperative now that businesses across the board, from food and drink to Fintech and everything in between, continue to make plans to be ready to capitalise on the opportunities that lie ahead and meet any challenges with confidence. That will be key to continuing a positive trajectory in the years to come.