Consumers lead the economy into optimistic territory despite delay to restrictions roadmap
The vaccine rollout and unlocking of parts of the Scottish economy are hugely positive but the recent delay to further easing of restrictions will continue to cause issues for certain sectors.
The recent opening of the Scottish economy enabled by the swift vaccine rollout, has led to expectations for Scotland’s economic growth being revised up to 5.9% in 2021 and 3.5% in 2022, according to the latest Economic Commentary by the Fraser of Allander Institute at the University of Strathclyde.
In the Deloitte sponsored Economic Commentary, the Fraser of Allander Institute now forecasts that the economy will reach its pre-pandemic peak in the summer of 2022, three months earlier than was forecast in March.
While recent pauses in the roadmap to ease restrictions have been challenging, particularly for those sectors and regions hardest hit by the pandemic, the Scottish economy has seen significant opening up since late April. This has been facilitated by the vaccine deployment, which has seen 82% of the adult population receive their first dose.
Mairi Spowage, Director of the Institute, said: “We have today revised up our expectations for growth in 2021 and 2022. Despite the pausing in the easing of restrictions we have seen over the last week or so, it is undoubtedly the case that growth is returning to our economy.
“In the aggregate, consumers appear to be ready to spend the record savings that have been accumulated throughout the course of the pandemic. With a large proportion of the population vaccinated, people have shown that in general they are keen to spend their money in social settings to feel a bit more normality.”
Despite the optimism, there are also risks to recovery which could provide headwinds to growth. The dislocation in global trade was significant due to the pandemic and the UK’s exit from the EU. This has led to major issues for manufacturers and others trying to rebuild these supply chains.
While the economy faces significant changes as it moves through to the recovery phase, the way people work has also changed, particularly for those who have been able to work from home during the pandemic.
As some businesses begin to consider a part-time return to the office, alongside homeworking practices, it remains to be seen how persistent these changes will be. This edition of the Commentary continues the discussion about the future of work, examining the sectoral differences of both prevalence and possible persistence of new ways of working.
Angela Mitchell, Consulting Partner and Senior Partner for Deloitte’s Glasgow office, said: “The optimistic forecast set out in the latest Commentary will be welcomed by many, despite current challenges, and lines up with Deloitte’s expectation that the UK economy will be one of the fastest growing in Europe in 2021, having suffered one of the largest contractions last year.
“As Scotland moves forward through the roadmap in line with case numbers and the ongoing vaccine deployment and businesses begin to look towards recovery, the future of work must be a key consideration for all organisations.
“For many organisations, the pandemic has accelerated a longer-term shift towards hybrid working practices. As restrictions ease, getting flexible working models right will be essential in attracting and retaining talent and, in many cases, could provide a competitive advantage”.
Mairi Spowage, Director of the Institute, concluded: “Despite our optimism, it is important to remember that forecasts are still very uncertain. The lengthening of the roadmap we have seen in recent days underlines the unpredictable nature of this virus, and the road ahead is likely to continue to be a bumpy one.”
This quarter’s commentary also includes:
- Analysis of Real Time Indicators, giving the most up to date snapshot of the Scottish economy;
- A summary of our recent research on Levelling Up prioritisation for Scottish regions; and,
- Discussion of how the COVID-19 pandemic and the end of the Brexit transition period has impacted global, UK and Scottish trade so far in 2021.
Alongside three additional articles:
- “International Student Applications in the United Kingdom after Brexit” Agnese Romiti, University of Strathclyde
- “Divergent Integration” Jan I. Haaland, Norwegian School of Economics & Ian Wooton University of Strathclyde
- “Looking back on the 2021 Scottish Election” – A collection & summary of the policy briefings the Fraser of Allander produced throughout the campaign – Edited by Mark Mitchell, Fraser of Allander Institute
The full commentary can be found at fraserofallander.org