The Scottish economy is set to recover to pre-pandemic levels three months earlier than previously thought.
This is according to the latest quarterly Economic Commentary from the Fraser of Allander Institute, which predicts growth of 6.5% in 2021 and 4.8% in 2022. The economy is now predicted to get back to pre-pandemic levels in April 2022.
Despite growth contracting slightly in July, mainly due to a fall in renewable electricity production, growth was significantly faster during Q2 than expected, leading to forecasts for 2021 and 2022 being revised up.
In the Deloitte-sponsored Economic commentary, the University of Strathclyde research institute discusses a number of risks that threaten recovery.
Today is the last day of the Job Retention Scheme, which has been pivotal in supporting household incomes and businesses since March 2020. How many of the currently furloughed workers will become unemployed or unable to secure the type and level of work they want is unknown.
This uncertainty coincides with the cancellation of the Universal Credit uplift which will bring additional financial hardship to around half a million families in Scotland.
As well as the risk of joblessness, labour shortages are becoming clear in many sectors, threatening goods shortages and adding to wider inflationary risks.
Consumer confidence, so important for the improvement in outlook over the last six months, could start to wane as prices across the economy rise.
As the economy moves, however uncertainly, into a new phase, policy focus turns towards dealing with the climate emergency. COP26 in Glasgow in November is seen as the last chance for world leaders to make the step change needed to halt the most harmful form of climate change.
In this edition of the Commentary, the research institute analyses the latest data about energy use in the UK, progress towards climate change targets, and progress on wider environmental outcomes, to provide context for COP26.
There is also analysis of business plans and ambition to achieve corporate net zero targets.
This quarter’s commentary also includes:
- A review of Real Time Indicators, giving the most up to date snapshot of the Scottish economy;
- Analysis of farming and climate change; and,
- Discussion of the role of economics in climate change policy.
This quarter’s commentary also includes two perspectives:
- The Economic Impact of Scotland’s Renewable Energy Sector, James Black, Fraser of Allander Institute
- Financial Firms and Climate Risk Assessment, Callum McGrath, University of Edinburgh
Authors
Mairi is the Director of the Fraser of Allander Institute. Previously, she was the Deputy Chief Executive of the Scottish Fiscal Commission and the Head of National Accounts at the Scottish Government and has over a decade of experience working in different areas of statistics and analysis.
Adam is an Economist Fellow at the FAI who works closely with FAI partners and specialises in business analysis. Adam's research typically involves an assessment of business strategies and policies on economic, societal and environmental impacts. Adam also leads the FAI's quarterly Scottish Business Monitor.
Find out more about Adam.
Frantisek Brocek
Frank graduated from the University of Strathclyde in 2019 with a First-class BA (Hons) degree in Economics. He is currently studying on the Scottish Graduate Programme MSc in Economics at the University of Edinburgh.
He has experience from a variety of economic policy institutions including the European Commission in Brussels, the Slovak Central Bank and the Ministry of Finance.
Ben is an economist at the Fraser of Allander Institute working across a number of projects areas. He has a Masters in Economics from the University of Edinburgh, and a degree in Economics from the University of Strathclyde.
His main areas of focus are economic policy, social care and criminal justice in Scotland. Ben also co-edits the quarter Economic Commentary and has experience in business survey design and dissemination.
Emma is Deputy Director and Senior Knowledge Exchange Fellow at the Fraser of Allander Institute