Scottish economy remains strong despite global headwinds

Scottish economy remains strong despite global headwinds

The Scottish economy remains strong despite increasing headwinds particularly impacting upon manufacturing and the oil and gas industry, according to new research.

Scotland’s chief economist, Dr Gary Gillespie, in his tri-annual state of economy report states this growth has been driven primarily by both household expenditure and investment - households having benefited from lower prices and an improving financial outlook.

Construction activity has been supported by a surge in public sector investment through 2015, driving growth strongly in this sector of the economy.

A more challenging external environment, however, including a more muted global economy and the effect of a sustained fall in oil prices, has led to a slowdown in growth as reflected in the most recent quarterly and annualised GDP data with growth of 0.1% and 1.9%, respectively.

Speaking on the research, deputy first minister John Swinney, said: “Today’s report shows that Scotland’s economy has remained resilient even in the face of increased global headwinds – continuing the longest period of continuous quarterly growth in the Scottish economy since 2001.

“Recent data has shown that Scotland’s economy has been performing well over recent years, with output and employment above their pre-crisis levels. Our economy, however, is facing a number of external challenges and the pace of growth has therefore slowed during the second quarter of the year.”

He added: “The Scottish Government will continue to work with businesses to focus on growing the economy and promoting Scotland as a great place to do business.”

Dr Gillespie’s report also highlights:

• Overall growth in Scotland remains forecast at just below 2% for 2015. 
• The labour market has remained resilient despite these headwinds and is performing close to pre-recession averages. 
• Although positive for many sectors of the economy, the fall in the price of oil has impacted negatively on the oil and gas sector in Scotland, which is reflected in the economy’s wider growth performance.
• The appreciation of sterling and the more muted global economy has also affected export activity, particularly in manufacturing.
• The balance of growth in 2016 should become more broad-based as improved productivity drives export growth and the wider service sector picks up.