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Scottish economy nowcast outlook

This week we received new data on UK GDP growth in Q4, which came in at a disappointing 0.0%.

Some of this was clearly due to Brexit uncertainty, but there are clearly other factors on the go this time around. For example, rather than rising significantly as per the previous pre-Brexit deadline in March 2019, manufacturing activity fell tipping that sector into recession. Continuing a consistent trend in recent years, business investment was weak once again, falling by 1% in the final quarter of the year.

Weaker global growth and a relatively fragile period for consumer confidence appear to be just as important explanations as any Brexit-induced uncertainty.

Businesses show increase in confidence for the coming 6 months after a challenging end to 2019

The Fraser of Allander Business Monitor is one of the first major surveys of Scottish firms post-election.
The figures show that the outlook for business activity, investment and employment are at their highest level since 2014. This follows a challenging end to 2019 for all these indicators.
Expectations of growth in the Scottish economy over the next year have also improved, with more firms believing it will be moderate, and less believing it will be weak.

You can read the full Business Monitor here.

Scottish Business Monitor Dashboard

	Q4 2019	3-year average	Change over quarter	Change over year
FAI Business Activity Index *(net % balance)**	5	8	0	-5 ▼
New Business	2	9	-1 ▼	-8 ▼
Turnover	4	9	-4 ▼	-9 ▼
Costs	63	54	7 ▲	8 ▲
New Capital Investment	-9	-7	-6 ▼	-5 ▼
Export Activity	-11	0	-3 ▼	-5 ▼

Our principal indicator of activity – the FAI Business Activity Index – remained unchanged this quarter, and just below its three-year average.

FAI Commentary: The outlook for the Scottish Budget 2020/21

This blog post contains the policy context chapter of our economic commentary, published today. The latest economic commentary can be found here.

Budget 2020/21 will be the fourth of five to be set in this parliament. Normally of course it would have been published by now – the Scottish Government initially planned to publish it on 12 December – and the process of scrutiny and debate on the proposals contained within it would have begun.

It was inevitable that the announcement of a UK General Election on 12 December resulted in the postponement of the Scottish budget. The outlook for the Scottish budget – and the viability and outcomes of tax and spending policies – is heavily dependent on UK Government policy decisions.

A Scottish budget published in advance of knowing the complexion of the UK Government would have had to be underpinned by a range of caveats and uncertainties, and could have been subject to substantial revision once the UK Government’s plans became known with greater certainty.

The fact that the General Election result last week was so decisive has in a blink lifted much of the uncertainty that it existed, at least in the short run (i.e. for 2020/21).Continue reading

Fraser of Allander Economic Commentary for Q4 2019 published today

General election provides moment of clarity amongst recent uncertainty – but debate over Scotland’s economic future likely to intensify in 2020

The Conservative majority means that the UK will leave the EU at the end of January 2020. But SNP gains in Scotland raise prospect of renewed debate on second independence referendum.

Read our latest economic commentary here.

The outcome of the UK General Election has resolved one element of uncertainty in the UK economic policy landscape – the UK will now leave the European Union on the 31st January.

However, any hope of a swift resolution to the recent period of uncertainty is likely to be dashed according to the latest Economic Commentary by the Fraser of Allander Institute at the University of Strathclyde, which is produced in partnership with Deloitte.

The nature of the UK’s future economic relationship with the EU has still to be resolved within just 12 months, whilst the divergence in election results between Scotland and the rest of the UK has fuelled calls in some quarters for a second independence referendum.Continue reading

Today’s Fraser of Allander Economic Commentary in 10 bullet points

Today we published our final Economic Commentary for 2019.

Here we summarise the key points.

Tomorrow we will get new GDP data for Scotland – covering the 3 month period to September

Chart: Scottish growth since 2014 – year and quarter %

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The latest data suggests that the economy will have bounced back somewhat (and thereby avoid a technical recession) after a slip-back in Q2 – following the unwinding of stock-piles in the run-up to the first Brexit deadline.

It will be important therefore not to read too much into one quarterly set of results. Instead, focus should be on the longer-term. This is likely to show that growth for the year as a whole is expected to come in once again at around 1% – marking a further year of disappointing below-trend growth for the Scottish economy.Continue reading