With the end of the financial year upon us, now is a good time to reflect on Scotland’s economic performance over the last twelve months and perhaps more importantly, consider the challenges that lie ahead.
The latest Economic Commentary from the Fraser of Allander Institute reveals that while Scotland’s economy is growing, the pace is slow and there is little to suggest it will increase at any significant rate over the next three years. A sharp drop in construction output, which has seen a decrease over seven successive quarters, is the biggest contributor to the economy’s more recent lacklustre performance. However, it is worth noting that construction is not indicative of all key sectors and the Fraser of Allander found that when construction activity was stripped out, growth has actually been much closer to trend.
While fragile growth coupled with slowing productivity - which remains one of Scotland’s greatest challenges - does not bode well, this quarter’s Commentary does provide some positives. Employment and unemployment continue to perform better than expected with the labour market remaining robust in challenging conditions. Scottish exports continue to do well and the country’s major trading partners are expected to have a strong 2018.
Of all the challenges facing our economy, in the immediate term Brexit is the biggest and most complicated. The 21 month ‘status quo’ transition period has provided a welcome development for business across the UK but is still dependent on agreement being reached on the UK’s withdrawal. This is not guaranteed, with a resolution still needed on the Irish border and definition on the role of the EU courts.
Any delay on the Brexit process at a political level should not be a reason for a corresponding delay for business. Given the scale and complexity of some of the business issues related to Brexit, it would be prudent for those businesses which have started to continue with their Brexit planning and for those who have not, to start now. This should help to ensure they are prepared for a range of potential outcomes. Time is short.
The range of issues industries will face during the Brexit process and in the years afterwards is as broad as it is complex. What’s vital is that business and government work together to ensure Scotland remains an attractive place to do business, an attractive investment opportunity, and an attractive place to work. Change is going to happen and Brexit does provide an opportunity for business and government to work together to overcome some of the key challenges we’ve faced in recent years, such as slowing productivity growth, by investing further in skills and technology.
Deloitte is proud to support the Fraser of Allander Institute’s Economic Commentary, access the latest Commentary here.
For more information on how your organisation can prepare for Brexit please visit our Brexit microsite.