Economic growth in Scotland will accelerate this year but will continue to trail the UK as a whole, a leading think-tank forecasts.
The EY ITEM Club predicts that the Scottish economy will grow by 0.7% this year on the gross value added measure, following estimated expansion of 0.1% in 2023.
It projects the UK economy will grow by 0.8% in 2024, following estimated expansion of 0.3% last year.
The EY ITEM Club said: “Scotland’s economy is set to gain momentum this year with the prospect of interest rate cuts from May onwards, a continuing fall in inflation, and decreasing energy prices.
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“Continued growth in pay and easing pressure on household finances should also boost consumer sentiment.”
The think-tank projects further acceleration in growth in Scotland, to 1.4% in 2025 and 1.6% in each of 2026 and 2027.
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The EY ITEM Club said: “As economic conditions and confidence improves, private sector services are set to drive growth from 2025 onwards. Among these, information and communication is set to lead, returning annual GVA growth of 2.8% in 2025. Activity in other key business service sectors should also gather pace in 2025, most notably administrative and support services and professional, scientific, and technical services, returning growth of 1.8% and 1.7% respectively.”
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The think-tank noted the Scottish labour market “remains resilient as unemployment remains low and the outlook is anticipated to improve in 2025 with growth across most sectors”.
However, it added: “It is expected that, over the longer term, employment prospects will be dampened by weak demographic growth, particularly compared to the rest of the UK.”
And it observed that “businesses continue to report recruitment difficulties, with high rates of inactivity and economic uncertainty limiting the supply of candidates”.
Ally Scott, EY’s managing partner for Scotland, said: “Although economic growth has been relatively flat, Scotland is slowly moving in the right direction with a brighter outlook expected for sectors such as information and communication, energy, and consumer-facing services. That said, there has been a softening in investor sentiment and challenges noted in the labour market, with employment growth remaining low and lagging the UK."
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