Economists have called on the Chancellor of the Exchequer to incentivise investment in the North Sea as well as to provide other corporate tax breaks in next week’s Budget in order to support Scotland’s economic recovery.
The Scottish economy is now expected to grow by 2.3% this year, an upward revision from the 1.7% forecast by the University of Strathclyde’s Fraser of Allander Institute (FAI) in October.
FAI said the expected growth boost was driven by household spending, employment and activity in the services sector – particularly financial services – according to the latest report from the economic researchers.
Yesterday’s FAI economic commentary also estimated the economy will grow by 2.3% in 2015.
Although the forecast suggests the recovery is strengthening, the researchers warned that weaknesses in both the Scottish and UK economies could still threaten future growth. It also noted that although Scottish jobs are now just -0.2% below their pre-recession peak, this continues to be worse than the UK, where the jobs total is 1.4% above the pre-recession peak.
Brian Ashcroft, Emeritus professor of economics at the University of Strathclyde, said: “The employment ‘recovery’ continues to be driven by an increase in part-time work and self-employment, although this may now be starting to moderate.”
The institute said that in order to sustain growth over the long term, an increase in investment and net exports – as well as manufacturing and construction activity – is needed. Prof Ashcroft said: “After six years since the start of the great recession we are now witnessing a stronger recovery, although this one is weaker than almost all previous recoveries. While there is room for considerable optimism, the continuing imbalances in both the Scottish and UK economies means the future path of the recovery is by no means certain.”
He added: “In the light of continuing weak investment and rising UK regional inequality in growth and income per head, the chancellor should use his forthcoming Budget to introduce a programme of private sector investment incentives.”
Paul Brewer, senior office partner at PwC in Edinburgh, said: “We’d like to see this week’s UK Budget focus on stimulating both domestic and inward investment. The government must use tax regimes to get investment flowing back into the economy and not just be divvied out to shareholders. So many companies are just sitting on reduced debt while others have hordes of cash.”