Scotland has been ranked among the most productive nations and regions in the UK but remains below the national average as the economy heads towards a difficult winter.

According to the latest UK economic outlook report produced by accountancy group PwC, growth in Scotland will sit approximately 0.5 percentage points behind the UK average this year before entering two years of slow or even negative growth. The severity of the downturn will largely depend on the course of energy prices and inflation, and the degree of government support available.

Scotland was behind only London and the south-east of England in terms of productivity at £39 per hour worked, however this was two percentage points behind the UK average. Meanwhile, PwC noted that workers across the UK are facing an average £2,000 cut to real wages by the end of this year as consumer spending power collapses under double-digit inflation.

Jason Morris, regional market leader for PwC in Scotland, said businesses and consumers face a very difficult situation as inflation heads towards a five-decade high, leading to the largest fall in real wages since records began.

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“With average income levels sitting below the national average, and due to the fact that lower-income households tend to see a higher budget share on fuel and food, there’s a real risk that households in Scotland could feel the impact more keenly,” Mr Morris said.

Under PwC’s “mild winter” scenario – some recovery in Russian gas exports, a fall in gas prices to their September starting levels, and “considerable” government support in response to the cost-of-living crisis – Scotland is likely to report growth of 3.1% for the whole of 2022.

If Russian exports remain highly disrupted and gas prices stay elevated, mitigating the impact of government support – the “harsh winter” scenario – growth will likely come in at 2.6%.

The freeze on household energy bills could keep inflation at a peak of between 10% and 13%, PwC said. In the absence of that, the forecast was for a peak 17% in the first half of next year.

"Until [the gas] market regains stability, predictions on the inflation outlook will remain difficult," Mr Morris added. "It presents a challenging environment for businesses to plan, mitigate and adapt."