Scotland is facing a recession, according to researchers at the
Fraser of Allander Institute.
The Glasgow institute’s quarterly economic commentary, which
includes an assessment of all the key latest data on the UK and Scottish
economies, was published yesterday.
In the Deloitte-sponsored study, researchers have set out their
new predictions for the Scottish economy.
The economists are forecasting growth of 3.6% in 2022, followed
by a contraction of -0.6% in 2023, before returning to growth in 2024 of 0.8%.
This is a significant revision down from the institute’s
previous set of forecasts in June.
The forecasts assume that the last two quarters of the year, and
the first quarter of 2023 will show contractions in the economy due to wider economic
challenges. This means that Scotland is likely to be entering into a
recession.
Price rises
With inflation at a 40-year high, this quarter’s commentary also
includes extensive analysis of the likely impact of price rises on different
types of households in the economy.
Professor Mairi Spowage, director of the institute, said “The
data we analyse in the commentary points to weakening demand in the economy as
inflationary pressures pervade every aspect of our lives.
“Consumer confidence is starting to weaken, with attitudes on
the outlook looking pessimistic.”
Angela Mitchell, senior partner for Deloitte in Scotland, said
“There is no doubt that businesses in Scotland face significant challenges over
the next few years.
“Many business leaders have never navigated their business, and
its people, through a period of such high inflation and weakening economic
activity.
“Charities and public bodies, unable to pass on costs or pivot
plans like businesses, are also facing immense pressure.
Dual blows
“The dual blows of the pandemic and cost-of-living crisis are
having a profound impact on the public sector’s spend power, while
simultaneously driving huge demand for public services.
“Unlike during the pandemic, however, there is an opportunity to
plan and prepare now for the months ahead.
“Business leaders will naturally want to focus on responding to
the most immediate challenges, but they should also consider what they want
their business to look like beyond the current challenges.
“Longer-term thinking, building in resilience and working
towards creating an organisation that is fit for the future, will help
businesses not only to recover, but to thrive.”