Scotland has an opportunity to “reset the sluggish trajectory” for its economy and “set a functional, pro-growth business agenda” with the change of leadership at Holyrood, EY has declared.
The accountancy firm highlighted this view as it published its latest forecasts for the Scottish economy, while also underlining the potential for change in the business agenda at a UK level, flagging "migration policies" in particular.
John Swinney succeeded Humza Yousaf as Scotland’s First Minister yesterday.
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EY Scotland managing partner Ally Scott said: “While political distraction and instability is never welcome within the business and entrepreneurial community, Scotland currently has an opportunity to reset the sluggish trajectory of what many of our reports imply and set a functional, pro-growth business agenda that can enable and accelerate a more vibrant and sustainable economy for the longer term.”
Commenting on the economic outlook and backdrop, he added: “As the Scottish business community anticipates a policy reset from new political leadership, our forecast shows the economy remains marginally behind, but largely tracks, trends we see at a UK level. The deterioration at the end of the year was most strongly felt in the manufacturing sector, which suffered a sharp decline in Q4, and, while the services sector was largely flat overall, some private service activities show signs of improvement.
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“Households and some business sectors appear to be gaining optimism about the year ahead, but recovery in household finances and spending will take time to feed through into growth. GVA (gross value added) growth is forecast to be weak this year but momentum is predicted to build for a brighter outlook for 2025 and beyond.”
EY forecasts Scotland’s economy will grow by 0.4% this year, on the GVA measure, which represents a downward revision from its previous 0.7% prediction for expansion in 2024. The accountancy firm has also reduced its forecast of growth in the UK as a whole this year, to 0.6%.
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It has revised up its forecast of Scottish growth in 2025 to 1.7%, from 1.4%, “with sustained growth expected in following years”.
However. EY observed that Scotland’s economic growth is expected over this period to also lag the UK as a whole, which is forecast to show annual growth of 1.8% in both 2025 and 2026, increasing to 1.9% in 2027.
EY noted that “much like the UK, Scotland’s economy has not grown in two years”.
It added: “With politics dominating the current headlines at both a Scotland and UK level, there may be opportunities to consider revisiting the economic growth and business agenda, including migration policies that could stimulate the economy and ease labour market headwinds persistently seen in EY macroeconomic forecasts.”
EY forecasts Scotland’s employment will grow by an average of 0.8% a year from 2024 to 2027.
The accountancy firm notes this lags expected average growth of 1.1% per annum in the UK as a whole over the same period.
EY said: “[The] Scotland-UK employment growth gap [is] in part due to under-representation in certain sectors which are expected to see stronger employment growth, such as professional, scientific and technical services, and the administrative and support sector.”
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