Scotland’s
economic recovery is gaining momentum, suggesting fertile conditions for
growth, but pace remains ‘anaemic’, according to the latest EY ITEM Club
Scottish Summer forecast.
The latest quarterly
GDP data indicates that the Scottish economy grew by 0.5% in the first quarter
of 2024, and the most recent estimate indicates that GDP output is at its
highest level since before the COVID-19 outbreak.
Sectoral data confirms
growth was wide-ranging as most sectors expanded, but consumer-facing sectors
enjoyed the strongest growth in the first quarter of the year. Monthly data
adds a further degree of optimism that Scottish economic growth is now on sounder
footing after the disappointing end to 2023 and the stop-start pattern of
growth that has plagued the last two years.
The most recent
estimate of GDP shows that output from the Scottish economy is at its highest
level since the start of the COVID-19 pandemic. In May 2024, the Scottish
economy was 3.0% larger than the average for 2019 as output increased by 0.3%,
following growth of 0.2% in April.
In May, inflation
dropped below 2% for the first time in three years, and the recent MPC interest
rate cut from 5.25% to 5.00% was voted through narrowly by the committee.
EY Scotland Managing
Partner Ally Scott said: “The change in UK political leadership teamed with a
vocal, UK-wide, pro-business vision of growth may currently be acting as a
balustrade but our latest forecast suggests Scotland’s economy is on more
stable footing than in previous years. While an upwards revision is to be
welcomed, the level of growth and productivity remains arguably anaemic and
collectively we should push for a more ambitious position.
“As we’ve seen with
previous forecasts, growth is predicted to come from consumer-facing sectors,
especially accommodation & food, largely driven by tourism. This continued
reliance on tourism, and Scotland as a destination, makes increased and sustained
investment in infrastructure and city centres all the more vital.
“With consumer-facing
sectors forecast to drive recovery, the implication is that it doesn’t take
much of a headwind for that growth to recede. Depending on this source of
recovery can be fragile, especially on the back of public finance messages from
the Chancellor and how fiscal policy may impact consumer confidence and
spending. All this points to an expedited industrial strategy being even more
necessary to safeguard stable, wide-ranging, and sustained economic growth.”