While 2023 is expected to play host to continued challenging conditions, the Scottish economy should see a return to calendar year growth in 2024 with Gross Value Added (GVA) rising by 1.6%, helped by a 2.3% increase in consumer spending, as employment and real wages recover. This is according to the latest EY ITEM Club’s Scotland Forecast.
Scottish GVA is anticipated to fall by 0.6% in 2023, with decline largely concentrated in the first half of the year. Some sectors can expect to see growth, led by health and social care (1.2%), education administrative and support services (1.1%), and public administration (0.8%) (page 22). Marginal rises are also forecast in professional, scientific, and technical sector (0.3%), as well as in construction (0.1%).
Scotland’s economy grew strongly in 2021 as it recovered from the pandemic, before slowing in the second half of last year. The EY ITEM Club estimates that Scotland’s GVA rose 5.3% in 2022, a slowdown from 7.9% in 2021, with 2022’s growth concentrated in the year’s first half. This pattern broadly mirrored the experience of the UK – and of much of the world – and reflected the impact on the global economy caused by the war in Ukraine and its consequences for confidence, supply chains, and energy prices and inflation.
Based on the latest forecast, it will be 2025 before Scotland’s GVA is expected to finally climb above where it was pre-pandemic.
EY Scotland regional managing partner, Ally Scott, said: “While challenging conditions are expected to stretch into the summer of 2023, we are starting to see signs in a number of areas which give cause for optimism – energy prices are falling and the economy has proved to be more resilient than expected.
“A return to calendar year growth is forecast in 2024, but Scotland will continue to face some long-term challenges in demographics, such as the profile of our working-age population. However, there are also some exciting opportunities that must be grasped if Scotland is to catch the next bounce of the ball in terms of local economic growth.
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By GlobalData“Growth opportunities can be created by building on Scotland’s world-class strengths in financial services, life sciences, software and technology. There are also clear natural advantages in navigating the transition to net zero – by industry and society – using established and emerging skills to move from traditional hydrocarbons and towards clean energy and renewables.
“It’s important we create an economic environment which inspires confidence to invest and grow differentially once more. We know this can generate strong positivity across Scotland, especially when coupled with our high attractiveness – both globally and within the UK – as a place to live, work and do business.”
