ECONOMISTS have slashed their forecasts for growth in Scotland noting that uncertainty about the implications of Brexit could weigh on activity as the year progresses.

The EY Scottish ITEM Club predicts output in Scotland will grow by just 0.8 per cent this year, compared with 1.4% previously.

The latest forecast comes in a report in which the forecaster highlights the impact of continued political uncertainty in the UK amid a slowdown in the global economy.

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The Scottish ITEM Club reckon Boris Johnson’s general election victory may have provided a boost to business and consumer sentiment but that any impact could fizzle out as the deadline for agreeing a trade deal with the EU approaches.

It said: “Consumer spending is predicted to be held back later in the year as caution increases when nearing the deadline for the EU transition period.”

Growth in Scotland is expected to increase to 1.4% next year on the assumption that a free trade agreement between the UK and European Union is reached before the existing deal expires or the transition period is extended.

There would be a significant downgrade to growth in 2021 if the UK had to trade with European Union counties on less favourable World Trade Organisation terms.

Other downside risks include the coronavirus and trade tensions between the US and China.

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The Scottish ITEM Club reckons output rose by 0.9% in Scotland in 2019, against 1.4% in the UK.

Growth in Scotland will lag the UK over the next four years but the gap will narrow.

Mark Gregory, chief UK economist for accountancy giant EY, said Scotland faced challenges in the labour market due to demographics, while international trade was slowing and business investment needed to catch up.

Ally Scott, managing partner for EY in Scotland, noted: “The current trajectory of Scotland’s demographics poses a challenge that will need to be carefully navigated.”

The ITEM Club raised its forecast for growth in the UK in 2020 to 1.2% from 1% in November, citing lower levels of political and economic uncertainty and the possibility of increased Government infrastructure boosting activity.

However when the last Scottish forecast was produced, in December 2018, the ITEM club reckoned the UK would achieve 1.7% growth in 2020.

The latest report notes the importance of London and the South East in driving UK activity.

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Growth in Scotland will be led by service sector businesses. The professional, scientific and technical sector will make the biggest contribution.

The manufacturing sector will contract marginally this year amid challenging conditions in export markets but return to growth next year.

Employment is predicted to increase in Scotland but at a slower pace than in recent years. The biggest percentage increases in job numbers will be in Edinburgh and Glasgow.

The Scottish ITEM Club reckons consumer spending will grow by 0.4% in Scotland this year.

In the preceding forecast issued in December 2018, it predicted that consumer spending would increase by 1.3% in 2020.

Growth in Scotland is expected to average 1.3% annually over the next four years compared with a UK rate of 1.6%.