Jobs outlook weak as Brexit fears bite

PwC predicts employment in Scotland will fall by 0.2 per cent next year, after declining by 0.4 per cent in 2016. It forecasts all other nations and regions of the UK will see a rise in employment both in 2016 and next year.

Paul Brewer, government and public sector partner at PwC, cited the forecast economic growth rate as the main factor in the prediction that Scotland would shed jobs.

He emphasised the June 23 vote to leave the European Union was the key factor in PwC’s forecast that growth would slow sharply next year in Scotland and the UK as a whole.

PwC chief economist John Hawksworth warned Brexit was likely to exert a “long, slow drag” on UK growth.

Scottish growth is forecast to be weaker than that in the UK as a whole both this year and in 2017.

Mr Brewer cited the troubles of the oil and gas sector as the “biggest single driver” of weaker growth in Scotland than in the UK as a whole.

But he added: “Across the [Scottish] economy, it is relatively slow.”

PwC forecasts the Scottish economy will grow by 1.8 per cent this year.

It predicts growth in the UK will be around two per cent this year, slowing to 1.2 per cent in 2017 as business investment drops as a result of uncertainty caused by the vote to leave the EU.

Mr Brewer noted PwC had seen the effect of this “planning uncertainty” on investment decisions among clients.

“They just don’t have confidence,” he added, highlighting businesses’ desire to see greater certainty “before they press the button on significant investments”.

Mr Hawksworth said of the UK picture: “A decline in business investment is likely to be the main reason for the slowdown in real GDP (gross domestic product) growth next year, driven in particular by uncertainty about the UK’s future trading relationships with the EU.

“But we expect Brexit to exert a long, slow drag on growth, rather than giving the economy a short, sharp shock. Businesses should therefore not be complacent about the impacts of Brexit just because the initial effect has been less negative than some had expected.”

On the employment front, Mr Brewer also highlighted a rise in economic inactivity levels in Scotland, in contrast to the position in the UK as a whole. He noted a particular rise in economic inactivity among women north of the Border.

He noted that, in the UK, the proportion of 16 to 64-year-olds neither in employment nor actively seeking work had fallen to 21.5 per cent in the June to August period, from 22.1 per cent a year earlier.

Mr Brewer added that, in Scotland, the inactivity rate for 16 to 64-year-olds had risen to 22.3 per cent in the June to August period from 21.3 per cent a year earlier.

He noted the inactivity rate for men had increased only slightly over this period, from 17.9 per cent to 18 per cent, but that for women had risen “much more markedly”, from 24.5 per cent to 26.5 per cent.

PwC forecasts annual UK consumer prices index inflation, which was one per cent in September, will have risen to 2.7 per cent by the end of next year. The tumble in the pound following the Brexit vote is putting upward pressure on inflation.

A survey published today by the Institute of Directors shows a sharp fall during October in UK businesses’ confidence about the economy. The proportion of firms that are pessimistic about the UK economy is much greater than that expressing optimism.

Of 1,071 respondents, 38 per cent were quite pessimistic about the wider UK economy. And a further 12 per cent were very pessimistic. Meanwhile, 25 per cent were quite optimistic, and five per cent were very optimistic. The remainder were neither optimistic nor pessimistic.

The pound tumbled during October, with the tone of the Conservative Party conference increasing fears of a “hard Brexit” scenario involving loss of free access to the European single market.