PwC forecasts slight fall in Scottish growth in 2018

Scotland is facing a slight fall in growth next year but is expected to avoid recession, according to a new report.

PwC's latest UK Economic Outlook projects that growth will slip back in Scotland from 1.3% this year to 1.2% in 2018.

UK growth is forecast to slow from about 1.5% to 1.4%.

According to PwC, all parts of the UK are likely to see "some moderation in growth" in 2017-18.

David Brown, from PwC in Scotland, said: "The latest projections see Scottish GDP growth for 2018 reducing by 0.1 percentage points compared to previous forecasts.

"This is not a Scottish-only issue, as many parts of the UK are seeing similar reductions, while still avoiding recession.

"In part it is due to the negative effect of slower productivity growth projections, which outweigh the positive of faster expected jobs growth."

Brexit and migration

PwC also analysed the impact of Brexit on migration, and the effect that the restriction of future migration from the EU could have on growth in certain sectors.

It noted that Scotland had the second highest proportion of European Economic Area (EEA) workers in the UK at 8%, behind London at 14%.

The analysis found that sectors most reliant on EEA workers include food manufacturing, construction, hotels and restaurants and warehousing.

While skills gaps left by lower future net migration from the EU could be filled by UK nationals and automation, this will take time, the report found.

Mr Brown added: "The impact of Brexit on immigration from the EU will not be known for some time, but if numbers are reduced then government and businesses will need to work together to try and fill skills gaps.

"While enhanced training of UK nationals and automation might be a solution in certain sectors if we look 10 to 20 years ahead, realistically they are unlikely to make up fully if there is any large reduction in EU migrant workers over the next five to 10 years."

'Key strengths'

Meanwhile, a study has ranked Scotland as the fourth most productive of 12 areas in the UK, behind only London, the south east and the east of England.

KPMG's regional productivity performance report found that Scotland's economy held "key strengths" in financial services, higher education, food and drink.

It said the oil and gas sector, in particular, had made "significant" productivity gains over the last 18 months.

KPMG report said the oil and gas sector had made "significant" productivity gains

However, the report highlighted a shortage of digital and technology skills in the workforce.

It said the findings emphasised the need for Scotland to invest in digital skills to "future-proof" productivity.

KPMG senior partner Catherine Burnet said: "Scotland has done well over the last 10 years in closing the productivity gap with the rest of the UK, but the UK level remains a low benchmark by international standards and more can be done.

"Looking ahead, we believe there are some key actions for business and policy makers to drive further improvements.

"Further enhancing digital and technology skills across the workforce; providing more managerial and leadership training in both private and public sector; and improving numeracy, literacy and science skills in schools, will play a significant role in improving productivity across the country."