SCOTLAND’S economic revival is picking up speed, pointing to promising conditions for expansion, yet the rate of growth is still considered ‘anaemic’. This assessment comes from the latest EY ITEM Club Scottish Summer forecast.
The most recent data on quarterly GDP shows that Scotland’s economy expanded by 0.5% in the first quarter of 2024, marking the highest GDP output since before the COVID-19 crisis.
Data from various sectors reveals broad-based growth, with consumer-oriented sectors leading the way in the first quarter of the year. Monthly figures also suggest a more stable economic outlook following a lackluster end to 2023 and the inconsistent growth pattern of the previous two years.
The latest GDP figures indicate that Scotland’s economy reached its peak since the onset of the COVID-19 pandemic. By May 2024, Scotland’s economy was 3.0% larger than the 2019 average, with growth of 0.3% in April, following an increase of 0.2% in the previous month.
In May, inflation fell below 2% for the first time in three years, and the recent decision by the Monetary Policy Committee to lower interest rates from 5.25% to 5.00% was approved by a narrow margin.
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.”
