The latest quarterly GDP data indicates that the Scottish economy grew by 0.5% in the first quarter of 2024, and the most recent estimate indicates that GDP output is at its highest level since before the COVID-19 outbreak.
Sectoral data confirms growth was wide-ranging as most sectors expanded, but consumer-facing sectors enjoyed the strongest growth in the first quarter of the year. Monthly data adds a further degree of optimism that Scottish economic growth is now on sounder footing after the disappointing end to 2023 and the stop-start pattern of growth that has plagued the last two years.
The most recent estimate of GDP shows that output from the Scottish economy is at its highest level since the start of the COVID-19 pandemic. In May 2024, the Scottish economy was 3.0% larger than the average for 2019 as output increased by 0.3%, following growth of 0.2% in April.
In May, inflation dropped below 2% for the first time in three years, and the recent MPC interest rate cut from 5.25% to 5.00% was voted through narrowly by the committee.
EY Scotland Managing Partner Ally Scott said: “The change in UK political leadership teamed with a vocal, UK-wide, pro-business vision of growth may currently be acting as a balustrade but our latest forecast suggests Scotland’s economy is on more stable footing than in previous years. While an upwards revision is to be welcomed, the level of growth and productivity remains arguably anaemic and collectively we should push for a more ambitious position.
“As we’ve seen with previous forecasts, growth is predicted to come from consumer-facing sectors, especially accommodation & food, largely driven by tourism. This continued reliance on tourism, and Scotland as a destination, makes increased and sustained investment in infrastructure and city centres all the more vital.
“With consumer-facing sectors forecast to drive recovery, the implication is that it doesn’t take much of a headwind for that growth to recede. Depending on this source of recovery can be fragile, especially on the back of public finance messages from the Chancellor and how fiscal policy may impact consumer confidence and spending. All this points to an expedited industrial strategy being even more necessary to safeguard stable, wide-ranging, and sustained economic growth.”
EY Scotland Managing Partner for Financial Services Sue Dawe said:
“The Scottish labour market continues to mirror problems at a UK level, however, Scotland’s over-reliance on certain sectors means those trends can be felt more acutely. For example, the structural concentration of manufacturing jobs in Scotland relative to other parts of the UK mean the effects on the local employment market may have higher impact.
“Some concerning trends in apprenticeships and the young labour market are emerging with potential short and long-term impact. The apprenticeship model is well-known to be crucial to the manufacturing skills pipeline but is also gaining popularity in business sectors. The Scottish Financial Services sector growth strategy specifically mentions the role apprenticeships could play in supporting social mobility in the sector while providing a pipeline of talent needed for us to compete on an international stage.
“Financial Services is crucial to a balanced economic growth trajectory in Scotland, not just as a growth sector in its own right but to enable all growth sectors to reach economic potential. We need to incentivise all levels of a skilled workforce to see Scotland as a place to build a successful career, rewarding life and contribute to a thriving, just, local economy.”
