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EY: Attractiveness Survey 2018: “Another strong year, but with precious little room for complacency”

Duncan Whitehead is the EY Lead for Economic Advisory in Scotland – DWhitehead2@uk.ey.com.

He is also a visiting researcher at the Fraser of Allander Institute.

The views expressed in this blog are those of Duncan. The blog summarises the latest findings from the EY Scotland Attractiveness Survey 2018 report.

Scotland continues to build on its recent strong FDI performance…

The latest findings from EY’s FDI attractiveness programme shows that Scotland recorded a 7% increase in the number of FDI projects secured, rising from 108 in 2016 to a 10-year high of 116. This means the number of inward investment projects in Scotland has reached new records in each of past three years.

The economic impact of changes in alcohol consumption in the UK

2018 is set to be a significant year for the UK alcohol industry as, after a prolonged legal battle, the Scottish Government has imposed a minimum unit price for alcohol of 50p per unit. Beyond Scotland, the policy has sparked debate on UK-wide policy with calls to develop a new UK alcohol strategy focused on reducing harmful consumption.

The purpose of this blog is to summarise the results from a recent research project on the potential macroeconomic impact of changes in UK alcohol consumption. Previous studies have tended to focus on the impact of a reduction in consumption on alcohol in isolation. However, it is likely that a shift in tastes away from alcohol – either through policy or change in consumption patterns – would result in an increase in spending on other goods and services. The full report presents a wide range of the modelled scenarios to look at this ‘net’ effect. Here we summarise just a few of them.

Gross national income statistics for Scotland: a net outflow of Scottish income?

Last week, the Scottish Government published experimental statistics on Scottish Gross National Income (GNI).

This is the latest in the round of developments to widen the coverage of economic statistics in Scotland. The commitment of the Scottish Government to improving the databank of Scottish economic statistics is to be commended. In recent years, this has seen the development of national accounts, a significant improvement in the coverage of GERS, a bringing forward of the publication of GDP and new statistics on Scottish productivity.

Retail sales in Scotland – resilient to the beast from the east?

Last week, we had the first set of official data on the potential impact of the bad weather on the UK economy when estimates of GDP for Q1 2018 were published. They showed that UK growth slowed to just 0.1% over the 3-month period.

The bad weather in early March (the ‘beast from the east’) has been cited as having been behind much of this weakness – although it’s unlikely to have contributed to all of the slowdown.

Of interest here in Scotland, is that today we have the first set of official estimates on economic activity – provided by retail sales – in Scotland for the same period.

They show that sales grew by 0.5% in real terms over the quarter, in sharp contrast to activity in GB as a whole where sales fell 0.5%.

These data offer some tentative signs of better performance in the Scottish economy than we have seen in recent quarters.

Spring Statement 2018

Today’s Spring Statement was expressly not a ‘budget’; it contained no new spending or tax policy announcements. Instead, it was an opportunity for the Chancellor to update parliament on the latest UK economic and fiscal forecasts.

It is only three and a half months since the Autumn Statement in November. The big statements then were about the major downward revisions to the forecasts for UK economic growth.

Today there was a smidgeon of relatively better news on the economy. GDP growth in 2017 turned out to be slightly higher than the OBR had expected, and it has also revised up its forecasts for 2018. But these upward revisions in the early years of the forecast are mirrored by slight declines in later years (the OBR has effectively reassessed its view of where we are in the ‘economic cycle’).

Moreover, the upward revisions are nowhere near sufficient to offset the downward adjustments in November (see Chart). UK growth of 1.5% in 2018 is still forecast to lag EU and US growth (forecast at 2.3 and 2.9% respectively by the OECD).Continue reading